[Federal Register: November 10, 2008 (Volume 73, Number 218)]
[Rules and Regulations]
[Page 66497-66512]
[DOCID:fr10no08-4]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2005-20836; Directorate Identifier 2005-NM-028-AD;
Amendment 39-15730; AD 2008-23-09]
RIN 2120-AA64

Airworthiness Directives; Boeing Model 727-200 and 727-200F
Series Airplanes; 737-200, 737-200C, 737-300, and 737-400 Series
Airplanes; 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-
200F, 747-300, 747-400, 747SR, and 747SP Series Airplanes; 757-200,
757-200CB, and 757-200PF Series Airplanes; and 767-200 and 767-300
Series Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for certain
Boeing transport category airplanes. This AD requires replacing any
insulation blanket constructed of polyethyleneteraphthalate (PET) film,
ORCON Orcofilm[reg] AN-26 (hereafter ``AN-26''), with a new insulation
blanket. This AD results from reports of in-flight and ground fires on
certain airplanes manufactured with insulation blankets covered with
AN-26, which may contribute to the spread of a fire when ignition
occurs from sources such as electrical arcing or sparking. We are
issuing this AD to ensure that insulation blankets constructed of AN-26
are removed from the fuselage. Such insulation blankets could ignite
and propagate a fire that is the result of electrical arcing or
sparking.

DATES: This AD is effective December 15, 2008.
    The Director of the Federal Register approved the incorporation by
reference of certain publications listed in this AD as of December 15,
2008.

ADDRESSES: For service information identified in this AD, contact
Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-
2207; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>; e-mail<EMAIL_ADDRESS>
Internet https://www.myboeingfleet.com.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://
www.regulations.gov; or in person at the Docket Management Facility
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this AD, the regulatory evaluation,
any comments received, and other information. The address for the
Docket Office (telephone<PHONE_NUMBER>) is the Document Management
Facility, U.S. Department of Transportation, Docket Operations, M-30,
West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE.,
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Shannon Lennon, Aerospace Engineer,
Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle
Aircraft Certification Office, 1601 Lind Avenue, SW., Renton,
Washington 98057-3356; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Summary of the NPRM

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to include an airworthiness directive (AD) that would apply to
certain Boeing Model 727-200 and 727-200F series airplanes; 737-200,
737-200C, 737-300, and 737-400 series airplanes; 747-100, 747-100B,
747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747SR,
and 747SP series airplanes; 757-200 and 757-200PF series airplanes; and
767-200 and 767-300 series airplanes. That NPRM was published in the
Federal Register on April 4, 2005 (70 FR 16986). That NPRM proposed to
require removing all insulation blankets within the pressurized areas
of the affected airplanes and installing a new insulation blanket
meeting the requirements of Section 25.856(a) of Title 14 of the Code
of Federal Regulations (CFR) (14 CFR 25.856(a)). That NPRM also
proposed to allow operators to develop methods for distinguishing
between insulation blankets constructed of AN-26 and other materials.
In addition, that NPRM proposed a provision that, if the FAA approves
such a method, operators would not be required to remove blankets they
determine are not constructed of AN-26.

Related Activities

    After issuance of the NPRM, we extended the comment period of the
NPRM by 60 days due to the extensive scope and significant potential
impact of the NPRM. An NPRM, extending the comment period, was
published in the Federal Register on June 6, 2005 (70 FR 32738).
Subsequently, we decided that more time was necessary for interested
parties to continue to evaluate the proposal and to submit additional
comments with more specific details concerning issues. An NPRM,
reopening the comment period, was published in the Federal Register on
November 23, 2005 (70 FR 70749).

Differences Between the NPRM and the Final Rule

    We have extended the compliance time of the required replacement
from 72 months to 96 months. The revised compliance time should
minimize the cost impact on operators by allowing more planning time to
comply with the requirements of this AD. We also have revised the cost
information and note that there is a substantial change in estimated
cost due to increased parts and labor costs, reduced number of
airplanes, and assumed service change for the future fleet. In
addition, we have deleted the reinstallation requirement of paragraph
(h)(2) of the NPRM. The reinstallation requirement would have created
an undue burden on operators because not all removals of insulation
blankets are done at a heavy maintenance visit with the necessary
replacement materials available.

Comments

    We gave the public the opportunity to participate in developing
this AD. We considered the comments received from the 21 commenters.
The significant comments are as follows.

Questioning the Safety Risk of AN-26

    Several commenters, such as the Air Transport Association (ATA) on
behalf of its members, Boeing, KLM, and Northwest Airlines (NWA),
request that we reconsider the NPRM because AN-26 poses a lower safety
risk than indicated in the NPRM, and that AN-26 was not considered
unsafe during certification.
    Boeing states that its in-service events/test data show limited
flame spread and no damage to structure/systems due to aged AN-26.
Boeing implies that the mitigating actions for the NPRM should be
revised to correspond to the low risk presented by the data, which are
proportionally associated with the combination of contamination,
ignition, and flame propagation.
    In addition, Boeing states that the replacement of AN-26 for all
locations

may not be required due to the isolation of materials from ignition
sources or lack of susceptibility to high levels of contamination. NWA
agrees with Boeing's conclusion that AN-26 (based on flame propagation
characteristics by itself) without contamination is not an unsafe
condition (i.e., high-level threat) for airplanes.
    Based on our review of the details of the in-service events/test
data, we do not agree with Boeing to revise the NPRM to reflect its
presented information or with its conclusions about the data. With
regard to ignition and propagation, we have examined the incident/event
history of fires involving airplanes manufactured between 1981 and 1988
and, in particular, those events that have involved AN-26 thermal/
acoustic insulation materials. Results of this examination revealed
that flames have propagated on the thermal/acoustic insulation
materials initiated from several types of ignition sources such as
electrical arc/sparks and lightning strikes. Flight or ground personnel
extinguished some of these fires with extinguishing equipment while
other fires self-extinguished. It is unknown whether all of these fires
would have self-extinguished and how much of the material would have
been consumed or if the fire would have spread to other materials.
These events took place in several areas of the airplanes, but
primarily in inaccessible areas, those that are hidden from view from
the passengers and flight crew. The burned areas ranged from a
relatively small area (< one ft\2\) to a large area (40 ft\2\). Some of
these events resulted in significant system and/or structural damage to
the airplane.
    We also do not agree with the commenters suggestions that an unsafe
condition only exists if contamination is present. Data from in-service
events and tests, conducted by both Boeing and us, support the
conclusion that relatively uncontaminated, in-service AN-26 has ignited
and resulted in unacceptable flame propagation behavior. As discussed
in the ``Background'' section of the NPRM, we have concluded that the
flammability characteristics of AN-26 are more a factor of fundamental
material properties than a factor of contamination.
    Contamination, in many cases, can increase the susceptibility to
ignition and flame propagation, although, in certain cases, some forms
of contamination actually inhibit the propagation of flames. In
addition, as discussed in the ``FAA's Determination and Requirements of
the Proposed AD'' section of the NPRM, we issued Flight Standards
Information Bulletin for Airworthiness (FSAW) 00-09, ``Special Emphasis
Inspection on Contamination of Thermal/Acoustic Insulation,'' effective
September 28, 2000, to ensure that operators have procedures defined in
their approved maintenance programs for the inspection for
contamination and corrective action. Boeing also has revised service
letters alerting operators to methods for preventing and removing
contamination. The procedures in these documents serve to mitigate the
separate risk associated with contamination.
    NWA also comments that AN-26 was not considered unsafe at the time
of certification, and that we are changing the flammability test for
insulation material 20 years after certification.
    We do not agree. Whether or not AN-26 meets the certification
flammability requirements that were applicable to the affected
airplanes is irrelevant to the determination of an unsafe condition. As
mentioned in Amendment No. 25-111 (68 FR 45045, July 31, 2003), prior
certification standards did not adequately distinguish between
acceptable and unacceptable materials. As a result, we did, in fact,
change those standards in Amendment No. 25-111, and the old test
methods are no longer applicable to thermal/acoustic insulation. As
such, our long-range plan is application of Amendment No. 25-111, where
material that met the previous standards will be reduced by attrition
as required by the associated 14 CFR Part 91 and Part 121 operational
rules.
    Furthermore, in response to NWA's observation that we are changing
test methods to account for electrical arcing, the arc/spark test is
only used to assess whether an unsafe condition exists. It is not used
as a certification standard. We have determined that the most common
ignition threat is electrical arcing/sparking. When AN-26 is subject to
arcs and sparks, it ignites and propagates a fire with characteristics
unlike other insulation material we have evaluated. These
characteristics create the unsafe condition.
    KLM and NWA are concerned that in addition to AN-26, there may be
additional materials that should be subject to the requirements of the
NPRM. KLM states that it received a list of several thermal/acoustic
insulation materials from ORCON, the manufacturer of AN-26, that do not
comply with 14 CFR 25.856(a).
    As discussed in the NPRM, this AD addresses an identified unsafe
condition (i.e., insulation blankets constructed of AN-26, if not
removed from the fuselage, could ignite and propagate a fire that is
the result of electrical arcing or sparking). AN-26 differs from other
films in use, except for metallized polyethyleneteraphthalate (MPET)
material which has been addressed in other similar rulemaking, in that
it is susceptible to propagation of a fire from a small ignition
source. Other films, while not necessarily meeting the requirements of
14 CFR 25.856(a), do not have this susceptibility. It is the
susceptibility to small ignition sources that creates the unsafe
condition.
    ATA states that AN-26 is not as unsafe as MPET. ATA states that
investigation results of in-service events and the FAA Technical
Center's video recording of the tests of insulation blankets
constructed of MPET indicate that propagation characteristics of AN-26
is not a safety threat.
    We do not agree with ATA's assertion that AN-26 poses a propagation
hazard significantly less than that posed by MPET. We have determined
that each material is susceptible to ignition and propagation from a
small ignition source and thus presents an unsafe condition. The flame
propagation characteristics of MPET in a specific test scenario are not
a recognizable standard with which to compare other materials,
including AN-26, as MPET has not been deemed the baseline material for
safety evaluations. For this same reason, we also do not agree that the
comparison of propagation characteristics of AN-26 and MPET should be
factored into the development of an appropriate compliance time for the
required replacement.

Service Information

    Several commenters, such as ATA, Continental, and NWA, express
concern about the lack of service information in order to comply with
the AD. ATA notes that paragraph (f) of the NPRM states that the
insulation blankets must be replaced ``using applicable maintenance
manual procedures.'' ATA states that such a provision is inadequate,
and that the effective date of the AD should be delayed to ensure
appropriate service information is available to operators. While
preparing for the MPET ADs \1\ (hereafter ``MPET ADs''), ATA found that
the maintenance manual procedures:
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    \1\ ADs 2000-11-01, amendment 39-11749 (65 FR 34321, May 26,
2000), and 2000-11-02, amendment 39-11750 (65 FR 34341, May 26,
2000).
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     Describe the fabrication of insulation blankets, but
provide no instructions for the removal or installation of insulation
blankets; and
     Do not adequately address the wholesale replacement of an
insulation blanket system nor provide any

accounting for assessing or planning the labor or logistical support
required to mount the proposed replacement.
    In addition, ATA states that having service information with
detailed procedures for replacing AN-26 in the flight deck and
electronics compartment (areas in which insulation blankets are rarely
replaced during the lifetime of an airplane) is necessary to ensure
that the electrical systems are not disturbed during the proposed
replacement. Without approved service information, ATA also states that
the NPRM, in effect, relies on the future development and FAA's
approval of operators' equivalent methods, alternative methods of
compliance (AMOC), or supplemental type certificates (STCs), or a
combination of these methods. ATA points out that it took 9 to 18
months to develop and to get approved 22 STCs for a similar issue
(i.e., strengthened flight deck doors).
    Continental states that the NPRM does not refer to any approved
service information with instructions for inspecting systems that are
disturbed during the AN-26 replacement. Without this service
information, Continental also states that Boeing, operators, and the
FAA will be unable to determine whether there are compliance issues
similar to those the FAA previously noted before the issuance of the
MPET ADs. Continental concludes that requiring operators to develop
their own service information will cause operators and the FAA an undue
burden after the AD is released and could cause compliance issues.
    As an alternative to extending the effective date of the AD, ATA
requests that we consider issuing a supplemental NPRM that proposes a
reasonable compliance time once appropriate service information is
available. ATA appreciates the reopening/extension of the comment
period of the NPRM to evaluate AMOCs; however, ATA notes that the
results of the evaluated AMOCs revealed that none of them have a high
likelihood of substantially reducing the cost impact of the NPRM. Since
no AMOCs have been approved for use, ATA states that any estimate of
their economic benefits and impacts would be somewhat speculative. ATA
believes that waiting for approved service information will ensure a
reasonable cost impact and will ensure the availability of at least one
practical method of compliance throughout the compliance time of the
AD.
    After issuance of the NPRM, we reviewed the following Boeing
special attention service bulletins:

            Table--Boeing Special Attention Service Bulletins
------------------------------------------------------------------------
   Boeing Special Attention
      Service Bulletin--             Dated--            For model--
------------------------------------------------------------------------
727-25-0300...................  April 30, 2008...  727-200 and -200F
                                                    series airplanes.
737-25-1572...................  April 30, 2008...  737-200, 737-200C,
                                                    737-300, and 737-400
                                                    series airplanes.
747-25-3429...................  April 30, 2008...  747-100B, 747-100B
                                                    SUD, 747-200B, 747-
                                                    200C, 747-200F, 747-
                                                    300, 747-400, 747SP,
                                                    and 747SR series
                                                    airplanes.
757-25-0295...................  April 30, 2008...  757-200, 757-200CB,
                                                    and 757-200PF series
                                                    airplanes.
767-25-0411...................  April 30, 2008...  767-200 and 767-300
                                                    series airplanes.
------------------------------------------------------------------------

    The special attention service bulletins describe procedures for an
optional one-time general visual inspection to determine if the
existing insulation blankets are constructed of AN-26, removal of
existing insulation blankets, and installation of new insulation
blankets. We have determined that accomplishing the actions specified
in those special attention service bulletins is considered an
acceptable means of compliance with the requirements of paragraphs (f)
and (g) of this AD. Therefore, we have revised paragraphs (f) and (g)
of this AD accordingly.
    Alternatively, we determined that existing maintenance manual
procedures should be sufficient for accessing and replacing AN-26 in
the flight deck, as well as the electronic and passenger and cargo
compartments. Maintenance manual procedures also provide instructions
for restoring disturbed systems and conducting detailed inspections of
disturbed wiring. Therefore, we determined that it is possible to do
the required replacement in these areas by developing the necessary
installation data in conjunction with existing maintenance practices.
We also determined that these areas will most likely be accessed during
a heavy maintenance check, which would better facilitate replacement of
insulation materials; and we have accounted for this in the compliance
time.
    We also acknowledge that the maintenance manual procedures describe
methods for fabricating replacement insulation blankets as well as
removal and installation of blankets in several locations throughout
the airplane. We also are aware that, through existing maintenance
manual procedures, it is possible to utilize existing insulation
blankets as templates in conjunction with new thermal/acoustic
insulation materials meeting 14 CFR 25.856(a) to create replacement
insulation blankets. While some operators may not be equipped or may
decide not to manufacture replacement insulation blankets, we are aware
that there are resources available in the industry to manufacture and
install replacement insulation blankets in almost all locations without
specific service information from Boeing.
    Furthermore, we are also aware that certain operators and modifiers
are developing their own installation data. We support the efforts of
these parties to generate potential methods of compliance. However, we
have not received any specific proposals to date.
    US Airways requests that the NPRM be withdrawn and reissued when
approved methods of identifying insulation blankets constructed of AN-
26 and service information are available. Boeing, British Airways (BA),
Continental, Henderson Projects, FedEx, NWA, and Transport Canada Civil
Aviation request that the NPRM be revised to include a method of
identifying non-compliant insulation blankets constructed of AN-26. Two
commenters specifically request that the first paragraph in the ``FAA's
Determination and Requirements of the Proposed AD'' section of the NPRM
be revised to include Boeing's AN-26 visual identification flow chart.
Without such a method, the two commenters state that operators will be
required to get approval from the FAA before installing replacement
insulation blankets, which will cause a significant work overload for
all respective parties. Another commenter states that Note 1 of the
NPRM is not adequate to identify AN-26 and would like to see color
pictures and a description of AN-26. Other commenters state that
including such a method will help offset the

economic impact on operators. One other commenter states that many
original insulation blankets have been replaced with locally fabricated
insulation blankets, which do not have visible markings.
    We acknowledge that operators need a better method to identify
insulation blankets constructed of AN-26. We are aware that ORCON used
a variety of methods to part-mark the subject materials, and in some
cases, there is no part marking at all. We are also aware that more
than one material has been qualified to Boeing's material specification
during the timeframe AN-26 was used.
    We do not agree, however, to include Boeing's AN-26 visual
identification flow chart in the current form in the AD. We have
determined that the flow chart does not provide an adequate means of
identifying insulation blankets constructed of AN-26 and lacks key
characteristics necessary to aid personnel. However, Boeing has
provided instructions for identifying insulation blankets constructed
of AN-26 in the service information described previously.

Need for More Meetings/Central Repository

    ATA requests that we form an Aviation Rulemaking Committee (ARC) to
coordinate insulation-related initiatives of large scope that may arise
in the future. ATA also requests that we work with manufacturers to
coordinate the development and publication of a central repository of
data showing:
     Thermal/acoustic insulation materials that have passed
current flame propagation test standards; and
     Plans to test in-service materials that have not yet been
tested.

ATA states that rulemaking applicable to insulation material can have a
tremendous impact on labor, out-of-service time and, in particular, the
development of methods of compliance and associated service
instructions, planning, logistic support, and configuration control,
for both production and out-of-production airplanes. ATA further states
that experience with insulation blanket rules similar to the NPRM have
shown that such initiatives should be regarded as significant, and are
candidates for extensive, close, and preferably advance coordination
within the industry and the FAA.
    We do not agree. We note that data regarding in-service materials
are already available from the FAA Technical Center. We have not seen
any tendency for aged material to perform differently than new
materials. While none of the data suggest that there is a trend toward
increased flammability with age, we support further investigation into
this issue. However, we do not plan to test additional materials,
unless new information surfaces to suggest a need. We do not agree that
a central repository of data, whether descriptive or substantiating, is
necessary. We have gathered test data for a number of in-service
materials, which can be accessed at: http://www.fire.tc.faa.gov/ppt/
materials/Flammability_test.zip. These data were obtained by the
International Aircraft Materials Fire Test Working Group (IAMFTWG) on a
strictly voluntary basis. In general, data are proprietary to the
applicant, and we cannot disclose those data to the public. We would
support an industry initiative wherein design approval holders
voluntarily disclose such information.
    We do agree that it is necessary to coordinate insulation-related
initiatives; however, we do not agree that it is necessary to form an
ARC. We, along with several manufacturers and operators, are a member
of the IAMFTWG, which studies improvements to flammability standards,
specifically those for non-metallic materials within the pressurized
portions of an airplane. The group is divided into several task groups,
one of which is the Aging/Contamination Task Group. Members of this
task group evaluate in-service parts from operators to study
contaminants and to determine materials used by manufacturers and
operators, and conduct laboratory tests to artificially age various
film materials. However, the IAMFTWG is not an FAA-chartered committee
and thus does not make specific rulemaking recommendations, nor can we
task it to do so. However, we actively participate in IAMFTWG meetings
and intend to utilize information provided by this group to determine
how contamination may impact the risk of fire and/or fire propagation
and also determine if alternative regulatory action may be appropriate.
In addition, the potential for forming a working group on aging and
contamination insulation materials was formally presented to the
Transport Airplane and Engine Issues Group (TAEIG) of the Aviation
Rulemaking Advisory Committee. Based on the minimal feedback from the
group members, we determined that such a working group is not
necessary, and therefore, we do not plan to initiate any activity
beyond that in the IAMFTWG.
    NWA proposes that we withdraw the NPRM until we can task industry
to develop a reasonable resolution to our insulation flammability
concerns (i.e., aging and contamination).
    We agree that it may be necessary to conduct studies on the effects
of contamination on insulation materials. However, we do not agree to
withdraw the NPRM until another industry task group can be formed to
address aging and contamination outside of current, ongoing activity.
We have concluded that the flammability characteristics of AN-26 are
more a factor of fundamental material properties than a factor of aging
or contamination. As discussed previously, we extended the comment
period of the NPRM in June 2005, as well as reopened the comment period
in November 2005. During that time, industry was unable to arrive at a
common approach or to propose specific AMOCs that are alluded to in
comments that were submitted to the NPRM. Any additional delay for
further study would be unacceptable, because doing so would allow the
unsafe condition to persist.

Compliance Time

    BA and Transport Canada Civil Aviation agree with the 72-month
compliance time for the replacement required by paragraph (f) of the
NPRM.
    ABX Air (ABX), ATA, Champion Air, Continental, DHL, FedEx,
International Air Transport Association (IATA), KLM, Lufthansa, NWA,
UPS, and US Airways request that the 72-month compliance time for the
replacement of AN-26 required by paragraph (f) of the NPRM be extended.
The commenters propose new compliance times ranging from 96 months to
144 months.
    Certain commenters state that such an extension will align with
their scheduled maintenance intervals such as a heavy maintenance, 4C-
check, C-check (two intervals), or D-check, and will thereby eliminate
disruptions in flight schedules. One commenter also states that 72
months would result in an undue maintenance burden. Another commenter
states that 72 months would result in unnecessary grounding of
airplanes due to the associated cost burden. Others state that such an
extension is necessary to offset the economic impact.
    Another commenter states a longer compliance time is necessary due
to the assertion that AN-26 is not as unsafe as MPET--an insulation
subject to an AD with a 60-month compliance time. The commenter notes
that investigation results of in service events and FAA Technical
Center test data associated with AN-26 indicate that the propagation
threat to safety is limited when compared to similar MPET data.

    We agree that the 72-month compliance time in paragraph (f) of the
NPRM can be extended. Based on the information supplied by the
commenters, and in consideration of the impact this type and level of
replacement action imposes on the operators and the size of the
affected fleet, we have determined that extending the compliance time
to 96 months will not adversely affect safety. We acknowledge that our
efforts with industry to minimize ignition sources and to reduce
contamination on insulation blankets are actions that reduce the risk
of fire, and thus are mitigating actions that support the compliance
time extension. While these factors partially mitigate the risk and
enable us to allow a compliance time that is longer than the 60-month
compliance time for the MPET ADs, they do not adequately address the
risk of flame propagation without removal or appropriate modification
of insulation blankets constructed of AN-26. As a secondary
consideration, this extension will allow the required replacement be
conducted during a regularly scheduled heavy maintenance visit for the
majority of the affected fleet, when the airplanes would be located at
a base where special equipment (i.e., special rigs, devices, etc., to
facilitate removal and installation of equipment) and trained personnel
would be readily available, if necessary. Therefore, we have revised
paragraph (f) of this AD to require a compliance time of 96 months.

Delete Freighter Airplanes From the Applicability

    DHL requests that freighter airplanes be deleted from paragraphs
(c)(1) and (c)(2) of the NPRM, because the risk for casualties in the
event of a fire is almost zero on those airplanes.
    We do not agree with DHL to exclude freighters or those airplanes
that have been converted from a passenger to a freighter configuration
from the applicability of this AD. AN-26 is primarily used in areas of
airplanes that are unoccupied, behind lining materials, and hidden from
view. The risk of an in-flight fire and the propagation of a fire in
those areas is essentially the same whether the airplane is equipped to
fly passengers or cargo. Therefore, we have made no change to the AD in
this regard.

Changes to the Applicability

    After issuance of the NPRM, we determined that Model 757-200CB
series airplanes are subject to the identified unsafe condition of this
AD. Currently, there are no affected Model 757-200CB series airplanes
on the U.S. Register. Because the identified unsafe condition is likely
to exist or develop on other products of this same type design that
could be registered in the United States in the future, we have revised
the applicability of this AD to include Model 757-200CB series
airplanes. Since no Model 757-200CB series airplanes are affected by
this AD, notice and opportunity for public comment before issuing this
AD are unnecessary.

Limit Replacement to Cover Film Material, Not Entire Insulation Blanket

    Boeing and NWA request that paragraphs (d) and (f) of the NPRM and
the ``FAA's Determination and Requirements of the Proposed AD'' section
of the NPRM be revised to refer to the replacement of the cover film
material only, not the entire insulation blanket. Boeing notes that the
FAA has only determined that AN-26 cover film is non-compliant with 14
CFR 25.856(a). Boeing states that requiring replacement insulation
blankets to be in full compliance under that rule is unnecessary and
places an undue hardship on the airlines and the supply chain for
replacement insulation blankets. Boeing also states that most
replacement insulation blankets are now available in the supply chain,
but the availability is strained to meet production needs that started
in September 2005.
    For comparison, Boeing points out that the MPET ADs only require
replacement of films to remedy the unsafe conditions of those ADs--not
tapes, threads, felts, hook/loop, etc., which are not part of the
safety issue. In addition, Boeing states that requiring the latest
materials for treatments or construction of replacement insulation
blankets will slow their installation, which will place an additional
burden on industry. Boeing states further that incorporating its
suggested change of mandating replacement of AN-26 cover film only will
also support alternate mitigation approaches to satisfy the safety
issue.
    We do not agree with the commenters' requests to limit the required
replacement to cover film materials only. Operational rules have been
implemented that require thermal/acoustic insulation materials
installed as replacements to meet the requirements of 14 CFR 25.856(a).
As such, there is significant benefit in defining a consistent standard
for this AD both from a level of safety perspective and from a
practical standpoint in order to avoid confusion. As stated in the
preamble of Amendment No. 25-111, the requirement is also applicable to
``tapes or hook and loop fasteners that are affixed to the film.
Research testing has shown that these details can have a pronounced
effect on the flame propagation characteristics of the insulation cover
material.''
    We do not believe that the supply chain for replacement materials
will be unnecessarily strained. The compliance time extension is
intended to allow for planning and ensuring availability of necessary
materials.
    In general, film material is intended to provide a level of
protection to the insulation batting or ``felt'' from contamination and
moisture. We have determined that removing the film alone may introduce
undesirable effects such as the breakdown of the insulation or batting
material due to the effects of moisture or other agents, which have not
been evaluated as part of this AD.
    We acknowledge, however, that removal and replacement of AN-26 film
cover material and associated affixed details such as hook/loop,
threads, etc., with materials compliant with the requirements of 14 CFR
25.856(a) may be an option for consideration of an AMOC should an
operator elect to pursue this means versus outright replacement of the
blanket assembly. We have made no change to the final rule in this
regard.

AMOCs

    Transport Canada Civil Aviation requests that the criteria for
evaluating and approving AMOCs for the replacement in paragraph (f) of
the NPRM be included in the final rule to assist industry in developing
such AMOCs.
    Boeing requests that we define the acceptance criteria in the AD
rather than requiring operators to obtain the criteria from the
Manager, Seattle Aircraft Certification Office (ACO). Boeing states
that this change, as well as airlines' input on implementation and cost
impact, will allow industry to develop solutions.
    We partially agree. We agree with the commenters that a description
of the criteria and test methods for evaluating AMOCs is needed to
reduce the flow time and overall implementation costs of the AD.
However, we do not agree that a change is necessary to this AD in this
regard. We have developed an FAA document that describes criteria and
test methods for evaluating AMOCs. You may view this document at http:/
/www.fire.tc.faa.gov/materials/AN_26_AMOC.pdf; or in the AD docket on
the Internet at http://www.regulations.gov.
    Boeing requests that the FAA follow Boeing's AMOC plan for ``Spray-
on

Solution,'' which it provided to the FAA in September 2004. In
addition, Boeing believes that its plan, approach, and schedule for the
overall safety issue aligns with the potential risk level that is
apparent from incident analysis and testing. Boeing states that the FAA
is aware of the development and progress of its spray-on fire retardant
solution, and that when approved, it will be an acceptable remedy to
the identified fire propagation condition with AN-26.
    Other commenters request that a specific AMOC such as Boeing's
spray-on-solution be included in the paragraph (f) of the final rule.
Some commenters request that the final rule not be issued until there
is an approved AMOC relating to spray-on fire retardants or covering
material using existing insulation materials.
    We acknowledge that Boeing has been in the process of developing a
spray-on fire retardant as an AMOC for the replacement required by this
AD. We understand that AMOCs can be valuable to assist operators in
complying with ADs. However, Boeing has not submitted its modification
to us for approval yet. We do not consider it appropriate to delay
issuance of this final rule, since we have determined that an unsafe
condition exists and that replacement must be conducted to ensure
continued safety. We will work with Boeing or other entities to approve
its modification when the development is complete and substantiating
data are provided.
    Boeing and Continental request that paragraph (h)(1) of the NPRM be
revised to allow the Boeing Commercial Airplanes Delegated Compliance
Organization (BDCO) to approve AMOC requests, in addition to the
Manager, Seattle ACO. Continental states that allowing such delegation
to the BDCO will enable operators to rapidly respond to day-to-day
operational issues and will lessen the operational burden of the
required replacement.
    We do not agree with Continental to delegate AMOC approvals to the
BDCO, nor do we agree with Boeing to revise our AMOC approval process.
In some ADs, we have authorized the BDCO to approve AMOCs for certain
structural repairs of cracking that are found during routine
maintenance or inspections. These repairs warrant ``routine'' handling.
However, we consider the required AN-26 replacement to be complex in
nature, and there are potential new and novel approaches for
compliance. It is crucial that the FAA be aware of all modifications
made to AN-26. It is essential that we have feedback as to the type of
modifications being made. Given that possible new relevant issues might
be revealed during this process, it is imperative that we have such
feedback. We can be assured of this feedback and of the adequacy of the
modification methods only by reviewing the modification proposals.
    We have determined that standardization and continuity of
modification approvals can best be maintained by having one single
point of approval for all AMOCs to the requirements of this AD. Since
the Manager, Seattle ACO, is accountable for the primary oversight for
the actions regarding this AD, it is appropriate to establish and
maintain this single point of approval. We have made no change to the
AD in response to these comments.

Exclude Certain Areas From Requirement To Replace AN-26

    ABX, Boeing, DHL, Florida West International Airways, Lufthansa,
and NWA request that paragraph (g) of the NPRM include a provision to
exclude areas (i.e., electrical equipment bay, flight deck, adjacent
areas, and certain areas behind the smoke barrier) that can be isolated
and contained and thus pose a limited fire risk.
    Some commenters state that removal of structure or systems to gain
access to certain areas may be more detrimental to safety of the
airplane. Two commenters also state that some areas containing AN-26
are not accessible after original installation. In addition, the
commenters state that their suggested provision will provide for
efficient implementation methods and will allow compliance with the
NPRM for the entire airplane.
    We do not agree with these commenters' rationale to include a
provision in paragraph (g) of this AD to exclude certain areas of the
airplane. We have evaluated the areas to which the commenters refers
and have determined that such areas are accessible. We do acknowledge
that certain areas may be easier to access when a major maintenance
activity is also occurring in these areas. Proper planning as to the
time of blanket replacement to coincide with other major maintenance
work, development of proper procedures, and training of maintenance
technicians and inspectors will minimize the chance of causing damage
to wires or other systems. We will require any operator/modifier that
develops its own installation data to include specific instructions to
ensure that any displaced wires, systems, and installations are in an
airworthy condition after doing the required replacement.
    We are not aware of any specific locations on the affected aircraft
where AN-26 cannot be accessed after original installation. If there
are certain areas that are completely inaccessible, we may consider
proposals for AMOCs, in accordance with paragraph (i) of this AD, which
include appropriate substantiating data.
    Boeing proposes to exclude certain areas up to 20 square feet and
has provided test and in-service data intended to support its request.
Boeing proposes that an equivalent area to the ``foam block'' be
defined to allow exempt areas. Boeing notes that the ``foam block'' is
defined by the FAA Technical Center as a realistic in-service fire
threat taking into account materials and contamination. Boeing states
that the crown test with the ``foam block'' is used by the FAA to
determine acceptable flame propagation performance. In addition, Boeing
states that the heat released from AN-26 film up to 20 square feet is
equivalent to the heat released from a polyurethane foam block.
    We do not agree with Boeing that it is appropriate to determine an
acceptable amount of square footage of insulation blankets constructed
of AN-26 based on the size of the Heptane-soaked ``foam block'' used
during FAA tests. The ``foam block'' was established as an appropriate
ignition source when doing intermediate and full-scale tests and the
resultant development of a suitable test standard capable of evaluating
improved thermal/acoustic insulation materials (i.e., 14 CFR part 25,
Appendix F, Part VI), but does not constitute a standard for an
acceptable area of AN-26. We do not agree that heat release
characteristics of the ``foam block'' can be translated to an
acceptable area of AN-26. Insulation blankets constructed of AN-26,
even in limited amounts, may be ignited via a small ignition source and
may propagate flames to other nearby materials and potentially lead to
a catastrophic event.
    We do not agree that the data, submitted by Boeing, to exclude
certain areas (i.e., electrical equipment bay, flight deck, and
adjacent areas) up to 20 square feet of AN-26 support its conclusion
that leaving AN-26 in place in those areas provides an acceptable level
of safety. Those areas are located where potential ignition sources are
likely to exist and thus are susceptible to the identified unsafe
condition of this AD. We have determined that the data submitted by
Boeing and the tests done by the FAA Technical Center support our
conclusion that AN-26 is susceptible to ignition and propagation, and
has an unacceptable ignition and

flame propagation behavior. This AD is intended to eliminate initiation
and propagation of an AN-26 fire in areas containing critical equipment
where the consequence of a fire would be severe.
    ABX states that the NPRM does not have any supporting data to
justify total replacement of insulation blankets constructed of AN-26.
Based on data it has collected from the Service Difficulty Report (SDR)
database, ABX concludes that there is no safety benefit to replacing
insulation blankets constructed of AN-26 in areas that have no or
minimal ignition sources.
    We do not agree with ABX that there are no data to support
replacing insulation blankets constructed of AN-26 in the entire
airplane. There are several incidents as cited in the NPRM that clearly
show the involvement of AN-26 in fire propagation. In addition, we have
conducted testing that shows that AN-26 can propagate a fire under
realistic conditions, and therefore even materials not near an ignition
source can become involved. While we agree that the SDR database does
not in itself contain this information, we do, in fact, have sufficient
information to conclude that AN-26 throughout the airplane represents
an unsafe condition. We have also received a report of burned
insulation blankets initiated by chafed wires and a resultant
electrical arc which was discovered by maintenance personnel. In
addition, potential ignition sources exist throughout the airplane and
insulation blankets constructed of AN-26 are located throughout the
airplane. As discussed previously, we have determined that insulation
blankets constructed of AN-26 in all areas of the affected airplanes
must be replaced, unless specific justification for an AMOC is
provided.
    Lufthansa states that the MPET ADs excluded areas with lower levels
of risk for ignition sources.
    We find that clarification is necessary. The MPET ADs do not
exclude any areas because of perceived lower levels of risk for
ignition sources. The preamble of the MPET ADs states that ``MPET
insulation blankets in all areas of the affected airplanes must be
addressed.'' It also states that `` * * * most [affected airplanes] do
not have MPET insulation blankets in the nose section of the airplane.
Also, a number of airplanes do not have MPET insulation blankets in the
fuselage, but have MPET insulation blankets only on the air
conditioning ducting.'' As such, the service information referenced in
the MPET ADs identifies certain areas where MPET is not installed, and
therefore, those areas are not subject to corrective action. Boeing
does not include this specific provision in service information for AN-
26, as AN-26 is installed throughout the affected Boeing airplanes.
However, we are aware that a number of AMOCs to the MPET ADs, excluding
certain areas from replacement, have been approved. For this AD, we
have accepted specific exclusion areas, which are identified in the
applicable special attention service bulletin described previously for
Model 747 and 767 airplanes.
    While some of the commenter's proposals to exclude areas of
replacement were accompanied by general rationale, the identification
of risk mitigating factors and exclusionary details were not specific
enough to enable us to approve such proposals other than those
identified in the special attention service bulletins. However, we may
approve requests for an AMOC under the provisions of paragraph (i) of
this AD if operators can show that leaving AN-26 in place is acceptable
because other design features prevent ignition and/or propagation of a
fire in the specific area requested. Any request to leave AN-26
installed in an airplane must provide justification that the identified
unsafe condition has been mitigated, and that an acceptable level of
safety is maintained.

Requests to Delete, Revise, or Limit Parts Installation Requirements

    ABX, ATA, BA, Boeing, Champion Air, Continental, DHL, IATA,
Lufthansa, NWA, and US Airways request that paragraph (h) of the NPRM
be deleted or revised for various reasons.
    In summary, the commenters state that a requirement to replace
insulation blankets constructed of AN-26 that have been removed in a
piecemeal fashion would have very little overall safety benefit and
would create a significant burden on immediate maintenance actions. In
addition, the commenters state that the replacement process should be
consistent with the flammability requirements to minimize the impact
with airline maintenance processes. They note that we similarly
addressed the replacement issue in 14 CFR 25.856 and this existing
replacement requirement is sufficient and will apply to in-service
airplanes affected by the NPRM.
    We partially agree with the commenters' requests. We do not agree
that paragraph (h) should be deleted. As stated in the preamble of the
NPRM, some international civil aviation authorities have not adopted
regulations similar to 14 CFR 91.613(b)(1), 121.312(e)(1),
125.113(c)(1), and 135.170(c)(1) to prohibit insulation blankets
constructed of AN-26 from being installed after a certain date.
Therefore, we have determined that paragraph (h) of this AD is
necessary to inform the international civil aviation authorities of the
need to prevent that installation.
    However, we do agree to revise paragraph (h)(1) (reidentified as
paragraph (h) of this final rule) to eliminate confusion with the
regulations noted previously by the commenters. We have revised
paragraph (h) of the AD to clarify that insulation blankets constructed
of AN-26 may not be installed ``as a replacement'' unless they have
been modified to meet the flame propagation requirements of 14 CFR
25.856(a).
    In addition, we do agree with the commenters that the proposed
conditions for reinstallation of insulation in paragraph (h)(2) would
create an undue burden on operators because, as mentioned by some of
the commenters, not all removals of insulation blankets are done at a
heavy maintenance visit with the necessary replacement materials
available. This may cause unnecessary downtime of airplanes to allow
for fabrication and installation of the applicable insulation blanket.
In consideration of the comments provided on this issue, we have
deleted paragraph (h)(2) of the NPRM.

Issue Special Airworthiness Information Bulletin (SAIB)

    Boeing requests that we issue a SAIB to inform industry about
mitigation approaches for material susceptible to contamination. Boeing
suggests that the SAIB reflect certain risks identified in its data and
emphasize replacement of significantly contaminated blankets.
    We partially agree. We acknowledge that providing information to
reduce contamination of insulation blankets in general is needed.
However, this information has been provided in FSAW 00-09, as described
previously. Therefore, we have determined that no SAIB specific to AN-
26 is necessary.

Clarification of Compliance Language

    We have slightly revised the wording in paragraph (c)(1) of this AD
to reflect currently used compliance language. That is, we have
replaced the reference to ``an original Airworthiness Certificate''
with a reference to ``an original standard Airworthiness Certificate.''

Clarification of Unsafe Condition

    We have revised the unsafe condition in this AD to state, ``Such
insulation blankets could ignite and propagate a fire that is the
result of electrical arcing

or sparking.'' We find that including the word ``ignite'' further
clarifies the unsafe condition of this AD.

Costs of Compliance

    This final cost analysis incorporates industry's comments, updated
fleet data, and a changed assumption on the future fleet service. This
AD affects 669 U.S. registered airplanes (Back Aviation Solutions,
Fleet iNET database, January 5, 2007), 41 of which are foreign
operated. We estimate compliance cost for the 628 U.S. operated and
registered airplanes only. The number of airplanes is reduced from
those in the NPRM because of airplane retirements or changes from U.S.
to foreign operation. A substantial decrease in estimated cost results
from the net change of increasing parts and labor cost, but reduced
number of airplanes, and a changed assumption of service for the future
fleet.
    Boeing commented to the docket that nonrecurring engineering design
costs of defining new blanket parts and defining removal and
replacement kits were not accounted for in the NPRM. Across the five
major models addressed in this AD, Boeing estimates 40,000 part numbers
would need to be redefined and replaced. Boeing estimates a minimum of
eight hours/part to account for the required engineering, planning,
procurement, tooling, and changes in ``Instructions for Continued
Airworthiness.'' ATA also noted non-recurring engineering costs should
be accounted for and estimated material costs would be over twice the
estimates given in the NPRM. UPS commented that the parts costs for a
757-200PF would be approximately triple the estimate given in the NPRM.
In response to these comments, we revised estimates of material cost
for all affected airplanes and increased our original estimates by
9.7%. More importantly, to account for non-recurring engineering costs,
we then doubled our revised parts cost estimates. This results in an
estimate of $30.4 million for non-recurring engineering costs (average
of $48,392 per airplane times 628 airplanes). If we estimate the
engineering wage rate at $100 per hour, this is close to the value of
Boeing's estimate of non-recurring engineering costs: 40,000 x 8 x $100
= $32 million, or $50,955 per airplane.
    UPS commented that our labor hour estimate was too low for Model
757-200PF airplanes, but ATA commented that our estimates of labor
hours were consistent with operator experience with the MPET ADs.
Accordingly, we have not changed our labor hour estimates. ATA
estimated labor rates would be up to 30 percent higher than the $65
hourly rate given in the NPRM for this final rule. We increased our
wage rate estimate to $80 an hour. FedEx noted that the NPRM did not
take into consideration additional out-of-service maintenance time
necessary for compliance. ATA provided an estimate of an average of 3.6
days of out-of-service time per airplane and also a cost estimate for
out-of-service time. We accept ATA's estimate of 3.6 days of out-of-
service time per airplane. We estimate out-of-service cost as the
opportunity cost of capital: Airplane value \2\ x Proportion of a year
the airplane is out of service (3.6/365) x Productive return on capital
(0.07).\3\
---------------------------------------------------------------------------

    \2\ Airliner Price Guide, vol. 57, January 2006.
    \3\ A 7% return on capital is required by the Office of
Management & Budget. See OMB, Circular A-94, ``Guidelines and
Discount Rates for Benefit-Cost Analysis of Federal Programs'',
October, 29, 1992, p. 8 (http://www.whitehouse.gov/omb/circulars/
index.html).
---------------------------------------------------------------------------

    The NPRM overestimated compliance cost by not taking into account
the fact that passenger airplanes eventually will be retired from
passenger service. This omission was particularly consequential, as the
affected airplanes are old, having been delivered into service over the
period July 1981 to December 1989. As of January 1, 2009, the youngest
airplane in the AD fleet will be 20 years old. Historically, on average
airplanes leave passenger service at 25 years, either directly into
retirement or for conversion into cargo service. For the purposes of
this analysis, we convert all passenger airplanes into cargo airplanes
at 25 years. This conversion to cargo service greatly reduces the
estimated cost of the AD as our estimate of the direct material and
labor costs for cargo airplanes is just 40% of those costs for
passenger airplanes. Still, this cost estimate is substantially higher
than assuming the airplanes retire at 25 years of service. Given the
eight-year compliance period for the final rule, all passenger
airplanes in the AD fleet will reach 25 years of passenger service at
most three years prior to the end of the compliance period, at which
time we assume they will be converted into cargo service.
    In the table, ``Cost of compliance,'' the NPRM cost estimates are
modified and expanded in accordance with the above discussion. ``Labor
hours per airplane'' is unchanged, but ``Labor cost per airplane''
increases because of the increase in the labor hourly rate from $65 to
$80. ``Parts cost per airplane'' has been increased by 9.7% to reflect
increased material cost. ``Labor costs per airplane'' and ``Parts costs
per airplane'' are summed to obtain the column of ``Total remove &
replace cost per airplane.'' This cost is multiplied by the number of
airplanes \4\ to obtain ``U.S. fleet remove & replace cost.'' ``Out-of-
service cost per airplane'' \5\ is calculated as an opportunity cost of
capital and multiplied by the number of airplanes to obtain the
following column of ``Total out-of-service cost.'' ``Total out-of-
service cost'' added to ``Total remove & replace cost per airplane''
equals ``Total Cost.'' Since we have no information on these
maintenance schedules by operator or airplane model, we assume that an
equal number of the affected airplanes will undergo heavy maintenance
at the end of each of the eight years from the effective date of the
AD.\6\ Accordingly, we calculate ``Present Value Total Cost'' in the
table by discounting ``Total Cost'' by the average (0.7464) of the 7%
discount factors for one through eight years.\7\ As noted earlier in
the preamble, compliance time was increased to 8 years to more closely
agree with operators' heavy maintenance schedules.
---------------------------------------------------------------------------

    \4\ Back Aviation Solutions, Fleet iNET database, January 5,
2007.
    \5\ For the 767-200 freighter category, airplane values were not
available for 26 airplanes. Accordingly, out-of-service cost per
airplane was estimated using airplane values for the remaining 16
airplanes in the category.
    \6\ This assumption is largely consistent with passenger
airplanes complying later in the compliance period than cargo
airplanes in order to extend their lives in passenger service to 25
years.
    \7\ OMB, Circular A-94, p. 8.
---------------------------------------------------------------------------

    We estimate the total cost of the final rule to be about $177.7
million, with a present value of about $140.8 million. The $177.7
million total cost is 53 percent of the $334.1 million total cost
estimated in the NPRM. Thus, even though our estimated labor rate has
increased by 23.1% and we have more than doubled our estimates of parts
cost, our estimate of total cost is much lower because of a reduction
in the number of affected airplanes and, most importantly, because of
the much lower AD costs for cargo airplanes compared to passenger
airplanes.\8\
---------------------------------------------------------------------------

    \8\ The cost of the rule may be somewhat lower than estimated to
the extent that airplanes go directly into retirement at age 25
rather than converting to cargo service as assumed here. Moreover,
even if an old airplane is not due for retirement, the operator will
still retire if more economical than compliance, in which case the
costs of the rule will also be less than assumed here.

                                                                                Table--Cost of Compliance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Remove and replace parts & labor cost                    Out-of-service cost
                                                            -----------------------------------------------------------------------------------------------
                                                                                Total                                                                  Present
                           Model                              Mechanic   Labor cost  Parts cost   remove &              U.S. fleet    Out-of-   Total out-   Total cost  value total  Total cost
                                                              hours per      per         per       replace    Number     remove &     service   of-service                   cost       per AP
                                                              airplane    airplane    airplane    cost per    of APs     replace     cost per      cost
                                                                                AP                    cost         AP
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
727-200 (& variants).......................................       1,618    $129,440     $69,966    $199,406        39   $7,776,834      $1,354     $52,823   $7,829,657   $5,844,153    $200,760
737-200, 737-200C, 737-300, 737-400 (& variants)...........       1,483     118,640      64,136     182,776       319   58,305,544       3,444   1,098,651   59,404,195   44,340,023     186,220
747-100, 747-200, 747-300, 747-400, 747SR, 747SP (&               5,933     474,640     256,542     731,182        42   30,709,644       7,414     311,382   31,021,026   23,154,476     738,596
 variants).................................................
757-200 (& variants).......................................       2,256     180,480      97,544     278,024       120   33,362,880       5,946     713,491   34,076,371   25,435,023     283,970
767-200 and 767-300 (& variants)...........................       3,236     258,880     139,932     398,812       108   43,071,696       6,636     716,702   43,788,398   32,684,199     405,448
                                                            ------------------------------------------------------------------------------------------------------------------------------------
    Total/weighted average.................................       2,238     179,054      96,785     275,839       628  173,226,598       4,607   2,893,050  176,119,648  131,457,874     280,445
                                                              wt. ave.    wt. ave.    wt. ave.    wt. ave.     total      total      wt. ave.      total       total        total      wt. ave.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Explanation of Change to Paragraph (f)(1) of This AD

    We have revised paragraph (f)(1) of this AD to remove reference to
the ``applicable maintenance manual procedures.'' Instead, paragraph
(f)(1) of this AD specifies to ``Remove all insulation blankets from
the pressurized areas of the fuselage and install new insulation
blankets using a method approved by the Manager, Seattle Aircraft
Certification Office (ACO), FAA.'' Operators should note that while
their existing maintenance manuals should be sufficient for
accomplishing the actions required by paragraph (f)(1) of this AD, they
must contact the Manager, Seattle ACO, for information regarding
approval of these procedures for compliance with paragraph (f)(1) of
this AD.

Conclusion

    We have carefully reviewed the available data, including the
comments received, and determined that air safety and the public
interest require adopting the AD with the changes described previously.
We have determined that these changes will neither increase the
economic burden on any operator nor increase the scope of the AD.

Final Regulatory Flexibility Analysis

A. Introduction and Purpose of This Analysis

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA)
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and of applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions
subject to regulation.'' To achieve this principle, the RFA requires
agencies to solicit and consider flexible regulatory proposals and to
explain the rationale for their actions to assure that such proposals
are seriously considered. The RFA covers a wide-range of small
entities, including small businesses, not-for-profit organizations, and
small governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will
have a significant economic impact on a substantial number of small
entities. If the agency determines that it will, the agency must
prepare a regulatory flexibility analysis as described in the RFA.
    We determined that this final rule will have a significant economic
impact on a substantial number of small entities and, accordingly, as
required by section 603(a) of the RFA, we prepared and published an
initial regulatory flexibility analysis (IRFA) as part of the NPRM for
this final rule (70 FR 16986, April 4, 2005). Section 604 of the RFA
also requires an agency to publish a final regulatory flexibility
analysis (FRFA) in the Federal Register when issuing a final rule.
Section 604(a) requires that each final regulatory flexibility analysis
contain:
     A succinct statement of the need for, and objectives of,
the rule;
     A summary of the significant issues raised by the public
comments in response to the IRFA, a summary of agency's assessment of
such issues, and a statement of any changes made to the NPRM resulting
from such comments;
     A description of and an estimate of the number of small
entities for which the final rule will apply;
     A description of the projected reporting, recordkeeping
and other compliance requirements of the final rule, including an
estimate of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record; and
     A description of the steps the agency has taken to
minimize the significant economic impact on small entities consistent
with the stated objectives of applicable statutes, including a
statement of the factual, policy, and legal reasons for selecting the
alternative adopted in the final rule and why each one of the other
significant alternatives to the final rule considered by the agency
which affect the impact on small entities was rejected.

B. Need for and Objectives of the Final Rule

    We are mandating a new AD for certain Boeing transport category
airplanes. The AD will require air operators to remove and replace
insulation blankets made of AN-26 with new insulation blankets. The AD
is prompted by reports of in-flight and ground fires on certain
airplanes manufactured with insulation blankets covered with AN-26.
Following the reports of in-flight and ground fires, the airplane
manufacturer and the FAA undertook extensive investigations and
flammability tests. Even though AN-26 met the certification standards
in 1981, the results of these flammability tests showed that AN-26 will
propagate a fire when subjected to electrical arcing and sparks.
    We are issuing this AD to ensure that operators remove insulation
blankets made of AN-26 from the fuselage. We previously issued similar
ADs on another insulation material that affected certain McDonnell
Douglas and Aerospatiale model airplanes.

C.1.A. Summary of the Significant Issues Raised by the Public Comments
in Response to the IRFA, a Summary of the Assessment of the Agency of
Such Issues, and a Statement of Any Changes Made to the NPRM Resulting
From Such Comments

C.2.A. Description of the Steps the Agency Has Taken To Minimize a
Significant Economic Impact on Small Entities and Why Other Significant
Alternatives to the Final Rule That Affect Small Entities Were Rejected

    There were no responses to the IRFA, but there were many comments
to the NPRM itself, which have relevance for small and large entities
alike. In response to these comments, the FAA made major changes to the
NPRM that significantly reduced the economic impact on the affected
firms.
    Twelve commenters, including one small firm (included in our data
analysis below), requested we extend the compliance time from the
proposed 6 years to 8 to 12 years, some noting that an increased
compliance time would more closely correspond to heavy maintenance
schedules (when all insulation blankets are removed). As discussed in
the preamble to the final rule, we have increased the compliance time
to 8 years. This reduces the economic impact of the final rule in two
ways. First, it increases the likelihood that a firm will be able to
comply with the final rule at the time of a scheduled heavy maintenance
check, thereby minimizing out-of-service time. Second, it allows the
average firm to delay compliance, thereby reducing the discounted cost
of the final rule. If we maintain our assumption that an equal number
of firms will undergo heavy maintenance in each year of the compliance
period, then an increase in the compliance period reduces the average
present-value discount factor from 0.8468 to the 0.7464 used in our
analysis, thereby reducing the present value cost of the final rule by
(.8468-.7464)/.8468 = 11.1%.
    Paragraph (h)(2) of the NPRM proposed that any insulation blanket
removed within six months of the final rule's effective date could not
be reinstalled unless it was compliant with the safety standards of
this final rule. Several commenters stated that this provision was
impractical and imposed an undue burden. In particular, the small firm
noted that:

    ``* * * as a supplemental carrier, our aircraft frequently
operate away from a maintenance base for extended periods. The

requirements of paragraph (h)(2) could generate significant out of
service time if a blanket has to be removed while the aircraft is
away from base since a replacement blanket would not be readily
available.''

    As discussed in the preamble to the final rule, we agree with the
commenters that the reinstallation provision would impose an undue
burden. We have deleted paragraph (h)(2) of the NPRM.
    The FAA believes there are no currently available additional
alternatives to the final rule that would allow the safety objectives
of the final rule to be achieved.
    For a complete summary of public comments and our responses, please
see the preamble to the final rule.

D. A Description of and an Estimate of the Number of Small Entities for
Which the Final Rule Will Apply

    To estimate the number of small entities, we first identified all
U.S.-operated affected civilian airplanes from a commercial fleet data
provider (BACK Aviation Solutions, Fleet-iNET database, November 20,
2006). Using information provided by company Web sites and other
Internet sources, we removed large commercial operators and commercial
operators that are subsidiaries of firms larger than the Small Business
Administration (SBA) size standard for the North American Industry
Classification System (NAICS) industry in question.\9\ For example, for
Atlas Air, Inc., the number of employees is 1220--below the 1500
employee threshold for the NAICS air transportation industries, in one
of which it operates (``Nonscheduled Chartered Freight Air
Transportation''). Atlas Air, however, is a subsidiary of Atlas Air
Worldwide Holdings (AAWH), which has 2007 employees.\10\ As 2007
employees exceed the SBA threshold, we did not include Atlas Air as a
small entity.
---------------------------------------------------------------------------

    \9\ U.S. Small Business Administration. Table of Small Business
Size Standards Matched to North American Industry Classification
System Codes, July 21, 2006.
    \10\ The employment figures for Atlas Air and AAWH are for 2005.
---------------------------------------------------------------------------

    Following this process, we ended up with 45 firms. From information
on firm Web sites or from other Internet sources, we were able to
classify most of these 45 firms by NAICS industry. For 15 firms, which
constitute most of the firms classified in four NAICS air
transportation industries (see table, ``Possible small firm operators
affected by the final rule by NAICS industry''), we were able to find
employment data showing that they were small by the SBA size standard
for these industries (upper bound of 1500 employees). Although we have
no size evidence for the remaining 30 firms, we suspect that many are
small by SBA size standards. We believe a substantial number of small
entities, in particular economic activities, are affected by this final
rule.

                Table--Possible Small Firm Operators Affected by the Final Rule by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                           Number of
                   Operator                       Number                            NAICS industry
                                                   APs     employees
----------------------------------------------------------------------------------------------------------------
Aviation Technologies Inc. (PA-USA)...........          1  .........  336413--Oth. A/C Part & Auxiliary Equip.
                                                                       Man.
Ameristar Jet Charter Inc.....................          2        160  481111--Scheduled Passenger Air
                                                                       Transportation.
Maxjet Airways................................          3  .........  481111--Scheduled Passenger Air
                                                                       Transportation.
Ryan International Airlines...................          2        649  481111--Scheduled Passenger Air
                                                                       Transportation.
Sierra Pacific Airlines.......................          1         32  481111--Scheduled Passenger Air
                                                                       Transportation.
Kitty Hawk Aircargo...........................          3        201  481112--Scheduled Freight Air
                                                                       Transportation.
Northern Air Cargo............................          4        225  481112--Scheduled Freight Air
                                                                       Transportation.
Champion Air..................................          5        739  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Gold Transportation Inc.......................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Omega Air Holdings DBA Focus Air..............          3        151  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Pace Airlines.................................          4        549  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Sky King Inc. (CA-USA)........................          2         75  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Vision Airlines...............................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Wedge Aviation Inc............................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Astar Air Cargo...............................          6       1023  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Capital Cargo International Airlines..........          3        188  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Cargo 360.....................................          3  .........  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Cargo Aircraft Management (all entries).......          5  .........  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Evergreen International Airlines..............          3        394  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Kalitta Air...................................          3        786  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Southern Air (CT-USA).........................          4        179  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Tradewinds Airlines (NC-USA)..................          1        263  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Celtic Capital Corporation (all entries)......          3  .........  522298--All Other Non-Depository Credit
                                                                       Intermediation.
Aerolease Financial Group Inc. (all entries)..          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Aeroturbine Inc. (all entries)................          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Automatic LLC (all entries)...................          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Aventura Aviation LLC (all entries)...........          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Echelon International Corporation.............          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
First Chicago Leasing Corporation (all                  1  .........  532411--Comm'l Air . . . Transp. Equip.
 entries).                                                             Rental & Leasing.
GA Telesis LLC................................          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
JT Power LLC (all entries)....................          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Pegasus Capital Corporation (all entries).....          5  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Nomads Inc....................................          1  .........  561520--Tour Operators.
NBA Orlando Magic.............................          1  .........  711211--Sports Teams and Clubs.
A & W Aeronautics Services Inc................          1
AA 767 LLC....................................          1
Apollo Aviation Capital LLC (all entries).....          1

Aviation Finance Group LLC....................          1
BCM Majestic Corporation......................          1
Blackwater USA LLC (all entries)..............          1
IDM Aviation Services LLC (all entries).......          1
Jet Partners LLC (NY-USA).....................          3
Leading Edge Group LLC........................          2
RPK Capital Management Group LLC (all entries)          1
WP Supply Corporation.........................          1
                                               -----------------------------------------------------------------
    Total.....................................        96
----------------------------------------------------------------------------------------------------------------
Sources: 1. List of firms & number of affected airplanes--Back Aviation Solutions, Fleet iNET database,
  November, 20, 2006. 2. Employment data--Ameristar Jet Charter, http://www.ameristar.com; Kalitta Air &
  Southern Air: http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedule
  P10. All others--http://www.bts.gov/Programs, Airline Date and Statistics, Number of Employees, Certified Air
  Carriers (Full-time and Part-time).

E. Reporting, Recordkeeping, and Other Compliance Requirements

    We expect that small entities will incur little or no new reporting
and recordkeeping requirements as a result of this final rule. Boeing
will incur substantial reporting and recordkeeping costs, but is not a
small entity.
    This AD will require compliance from operators of large commercial
transport category Boeing Model 727, 737, 747, 757, and 767 airplanes
having an original standard Airworthiness Certificate or original
Export Certificate of Airworthiness issued between July 1981 and
December 1988 inclusive. The AD also applies to five specific Boeing
Model 747-400 airplanes delivered in 1989.\11\
---------------------------------------------------------------------------

    \11\ Boeing Model 747-400 airplanes with serial numbers 23719,
23720, 23814, 23816-23820, 23999, 24061, and 24062.
---------------------------------------------------------------------------

    The AD requires that operators of affected Boeing airplanes replace
insulation blankets made of AN-26 with new insulation blankets
complying with 14 CFR part 25.856(a). As shown in the ``Cost of
Compliance'' section of the final rule, this operation requires
thousands of labor hours and, consequently, is an expensive operation
that will have a significant economic impact on the substantial number
of small firms we have identified above. That impact is documented and
analyzed below.
1. Economic Impact on Small Operators Assessed With Financial Data
    In our analysis of the economic impact of the final rule on small
entities, we were restricted to 14 of the 45 potential small entities
owing to the availability of Department of Transportation financial
data for air transportation operators. These operators are 14 (of the
15) operators identified in table, ``Small firm operators affected by
the final rule by NAICS industry,'' as small entities based on
employment. We first incorporate into the analysis the final rule's 8-
year compliance time, a period specified to closely agree with airplane
heavy maintenance schedules. Since we have no information on these
maintenance schedules by operator or airplane model, we assume that an
equal number of affected airplanes will undergo heavy maintenance at
the end of each of the eight years from the effective date of the final
rule.\12\ Accordingly, we calculate the variable ``Present Value AD
Cost'' in the table by discounting ``AD Cost'' \13\ by the average
(0.7464) of the 7% discount factors for one through eight years.\14\ As
we noted previously, we reduced the economic impact of the final rule
by extending the compliance time from six to eight years. That reduced
impact is reflected here in a lower Present Value AD Cost.
---------------------------------------------------------------------------

    \12\ As noted in the ``Cost of Compliance'' section of this
rule, this assumption is largely consistent with passenger airplanes
complying later in the compliance period than cargo airplanes in
order to extend their lives in passenger service to 25 years.
    \13\ AD Cost is for the affected fleet of each operator and is
calculated using cost per airplane from the ``Costs of Compliance''
section.
    \14\ A 7% discount rate is required by the Office of Management
& Budget. See OMB, Circular A-94, ``Guidelines and Discount Rates
for Benefit-Cost Analysis of Federal Programs'', October, 29, 1992,
p. 8 (http://www.whitehouse.gov/omb/circulars/index.html).
---------------------------------------------------------------------------

    The last column of table, ``Financial data by small operator for
assessing the economic impact of the final rule,'' shows that Present
Value AD Cost as a percentage of Operating Revenues is 1% or greater
for 8 of the 14 operators (and as high as 13.1%). The median impact is
1.0% of Operating Revenues. We sort the table by Operating Revenue to
demonstrate the economic impact tends to be higher for the smallest of
the small operators. We should note that these percentages do not
represent a continuous impact on operating revenues. Rather, they
measure the economic impact of the final rule as a one-time capital
cost relative to the financial size of the operators.

                               Table--Financial Data by Small Operator for Assessing the Economic Impact of the Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                PV AD cost/
                                                                                Op. Revenue ($                   Present value     operating
                    Airline                                Type           Employment \1\     000) \2\       AD cost \3\     AD cost ($)       revenue
                                                                                (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kitty Hawk Aircargo............................  C                                   201           3,799         558,660         416,991            11.0
Omega Air Holdings dba Focus Air...............  C                                   151          12,634       2,215,788       1,653,891            13.1
Sierra Pacific Airlines........................  P                                    32          12,967         186,220         138,997             1.1
Sky King Inc...................................  P                                    75          18,535         372,440         277,994             1.5
Northern Air Cargo Inc.........................  C                                   225          45,440         744,880         555,988             1.2

Capital Cargo International....................  C                                   188          46,913         602,281         449,550             1.0
Pace Airlines..................................  P                                   549          57,160         842,630         628,949             1.1
Southern Air Inc...............................  C                                   179          59,614       2,954,383       2,205,188             3.7
Tradewinds Airlines............................  C                                   263          60,848         738,596         551,297             0.9
Champion Air...................................  P                                   739         142,301       1,003,802         749,250             0.5
Ryan International Airlines....................  P                                   649         157,888         567,940         423,917             0.3
Astar Air Cargo Inc............................  C                                  1023         331,929       1,204,563         899,100             0.3
Kalitta Air LLC................................  C                                   786         372,546       2,215,788       1,653,891             0.4
Evergreen Int'l Inc............................  C                                   394         392,103       2,215,788       1,653,891             0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 .......................  ..............       1,714,676      16,423,758      12,258,895             1.0
                                                                                Total           Total           Total          Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Employment data is for 2005.
\2\ Op. Revenue is the average for 2003-2005, but for Omega Air Holdings is the 2005 value only.
\3\ AD Cost is for the affected fleet of each operator and is calculated using cost per airplane from the ``Costs of Compliance'' section of this final
  rule. See table, ``The cost of the final rule relative to the value of the affected fleet by operator.''
Note: The discount factor for AD Cost is 0.7464, the average of the 7% discount factors for Years 1 through 8 from the effective date of the AD.
Sources: 1. Employment data--Kalitta Air & Southern Air: http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedule
  P10. All others--http://www.bts.gov/Programs, Airline Date and Statistics, Number of Employees, Certified Air Carriers (Full-time and Part-time). 2.
  Operating Revenue--http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedules P1.1 & P1.2.

2. Economic Impact on Small Operators Assessed With Affected Fleet
Values
    Since, as noted previously, the costs of this final rule occur as a
one-time capital cost, another way to assess the economic impact of the
final rule is to measure the costs of the final rule relative to the
capital value of the airplanes the final rule affects. Table, ``The
cost of the final rule relative to the value of the affected fleet by
operator,'' lists the 14 operators, the number of affected airplanes,
AD Cost per airplane, Total AD Cost, and Affected Fleet Value. The key
variable in that table is Affected Fleet Value, which sums affected
airplane values for each operator. These values were obtained from the
Airliner Price Guide, vol. 57, January 2006. That table shows that AD
Cost as a percentage of Affected Fleet Value is high, with a median
value of 12.2 percent and values ranging as high as 32.9 percent.\15\
Both measures of the cost of compliance--discounted AD cost relative to
operating revenue (table, ``Financial data by small operator for
assessing the economic impact of the final rule'') and AD cost relative
to affected fleet value (table, ``The cost of the final rule relative
to the value of the affected fleet by operator'')--indicate that this
final rule will have a significant economic impact on a substantial
number of small entities.
---------------------------------------------------------------------------

    \15\ Relatively high Total AD Cost/Affected Fleet Value
percentages may reflect low airplane values. Low airplane values
suggest airplanes may retire before the compliance deadline, thus
allowing operators to avoid or reduce compliance cost. See
discussion in Section 4.

                                Table--The cost of the Final Rule Relative to the Value of the Affected Fleet by Operator
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Affected fleet   AD cost/fleet
               Operator                     Type          Equipment type (LAR     Number    AD Cost/AP     Total AD cost   value ($ mil)       value
                                                               code) \3\            AP          ($)             ($)             \2\          (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Astar Air Cargo......................  C               Boeing 727-200F.........        6         200,760       1,204,563            7.27            16.6
Capital Cargo Int'l Airlines.........  C               Boeing 727-200F.........        3         200,760         602,281            3.27            18.4
Champion Air.........................  P               Boeing 727-200..........        5         200,760       1,003,802            3.05            32.9
Evergreen International Airlines.....  C               Boeing 747-200B/SCD.....        3         738,596       2,215,788           30.44             7.3
Kalitta Air..........................  C               Boeing 747-200B (2), -          3         738,596       2,215,788           14.44            15.3
                                                        200B/SCD(1).
Kitty Hawk Air Cargo.................  C               Boeing 737-300F.........        3         186,220         558,660           22.33             2.5
Northern Air Cargo...................  C               Boeing 737-200 (3), 200C/       4         186,220         744,880            3.52            21.2
                                                        F (1).
Omega Air Holdings DBA Focus Air.....  C               Boeing 747-200B/SCD (2),        3         738,596       2,215,788           24.68             9.0
                                                        -300/SCD (1).
Pace Airlines........................  P               Boeing 737-200 (2), -300        4     210,657 \1\         842,630           14.25             5.9
                                                        (1); 757-200 (1).
Ryan International Airlines..........  P               Boeing 757-200..........        2         283,970         567,940           15.42             3.7
Sierra Pacific Airlines..............  P               Boeing 737-200..........        1         186,220         186,220            0.84            22.2
Sky King Inc. (CA-USA)...............  P               Boeing 737-200..........        2         186,220         372,440            1.72            21.7
Southern Air (CT-USA)................  C               Boeing 747-200B/SCD (2),        4         738,596       2,954,383           33.72             8.8
                                                        -200F (2).
Tradewinds Airlines (NC-USA).........  C               Boeing 747-200B/SCD.....        1         738,596         738,596            8.42             8.8
                                      ------------------------------------------------------------------------------------------------------------------

    Total/Average....................  ..............  ........................       44      376,028       16,545,237        183.37           12.2
                                                                                (wt. avg.)         (total)         (total)        (median)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Cost/AP for Pace Airlines is weighted average of 737s and 757 costs.

 Pace Airlines P Boeing 737-200 and -300 3 186,220 558,660
 Pace Airlines P Boeing 757-200 1 283,970 283,970

\2\ Affected Fleet Value is the sum, by small operator, of the values of affected airplanes. Airplane values were obtained from the Airliner Price
  Guide, vol. 57, January 2006.
\3\ Equipment Type & number of airplanes were obtained from Back Aviation Solutions, Fleet iNET database, January 17, 2007.

3. Disproportionality Analysis
    Disproportionality analysis addresses the question of whether small
entities bear a larger compliance burden than larger entities. Large
operators may be able to negotiate better pricing from outside sources
for purchase, installation, and inspection of insulation blankets. We
do not have the data that would allow us to assess that potential
advantage. Data are readily available, however, to calculate the
percentage of operators' airplanes affected by this final rule. We use
this simple measure to compare the equipment compliance burden of the
small operators with the 15 large airline operators affected by the
final rule. One small operator, Maxjet Airways, was added to the small
operator list, so as to have equal-sized small and large comparison
groups.\16\ The data are shown in table, ``Proportionality analysis
using the percentage of the fleet affected by the final rule, by small
and large operators,'' which sorts the data by Affected Fleet as a
percentage of Total Fleet for both small and large operators. As
measured by this variable, small operators generally have a higher
compliance burden than large operators--a result summarized in the
higher mean percentage (38% vs. 29%) and much higher median percentage
(31% vs. 17%) for small operators.
---------------------------------------------------------------------------

    \16\ We identified Maxjet Airways as a highly likely small
entity by Maxjet's small total fleet size compared with other small
operators.

               Table--Proportionality Analysis Using the Percentage of the Fleet Affected by the Final Rule, by Small and Large Operators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Affected                                                               Affected
                                              Affected                 fleet/total                                   Affected                fleet/total
              Small operator                   fleet     Total fleet      fleet             Large operator            fleet     Total fleet     fleet
                                                                        (percent)                                                             (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kitty Hawk Air Cargo......................            3           32          9.4   Alaska Airlines..............            2           93          2.2
Kalitta Air...............................            3           20         15.0   American Airlines............           31          374          8.3
Astar Air Cargo...........................            6           31         19.4   United Parcel Service........           15          148         10.1
Ryan International Airlines...............            2           10         20.0   United Air Lines.............           40          310         12.9
Capital Cargo Int'l Airlines..............            3           14         21.4   Atlas Air....................            3           23         13.0
Evergreen Int'l Airlines..................            3           14         21.4   Continental Airlines.........           48          366         13.1
Tradewinds Airlines (NC-USA)..............            1            4         25.0   Hawaiian Airlines............            4           29         13.8
Champion Air..............................            5           16         31.3   Federal Express..............           18          105         17.1
Sky King Inc. (CA-USA)....................            2            6         33.3   Southwest Airlines...........           83          479         17.3
Southern Air (CT-USA).....................            4            9         44.4   Delta Air Lines..............           72          319         22.6
Pace Airlines.............................            4            8         50.0   US Airways...................           41          113         36.3
Sierra Pacific Airlines...................            1            2         50.0   Northwest Airlines...........           44          114         38.6
Northern Air Cargo........................            4            7         57.1   Aloha Airlines...............           13           24         54.2
Omega Air Holdings DBA Focus Air..........            3            4         75.0   America West Airlines \1\....           29           39         74.4
Maxjet Airways............................            3            3        100.0   ABX Air......................           38           38        100.0
                                           ----------------------------------------                               --------------------------------------
    Totals................................           47          180  ............  Totals.......................          481         2574  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Median................................  ...........  ...........         31.3   Median.......................  ...........  ...........         17.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Mean..................................  ...........  ...........         38.2   Mean.........................  ...........  ...........         28.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ American West Airlines merged with U.S. Airways on September 27, 2005. A merger of the FAA operating certificates was expected in 2007.
Source: Back Aviation Solutions, Fleet iNET database, December 5, 2006.
Note: Medians and means are column averages. Affected Fleet/Total Fleet for all small operators is 47/180 = 26.1% compared with 481/2574 = 18.7% for all
  large operators. These figures are equivalent to weighted means of the Affected Fleet/Total Fleet percentages with the operator's total fleet numbers
  as weights. As an average of the column of percentages, the unweighted mean corresponds to the median, and more appropriately reflects the situation
  of the typical operator in its group.

4. Conclusion on Economic Impact
    On the basis of our analysis in sections E.1-E.3 above, we conclude
this AD will have a significant economic impact on a substantial number
of firms.\17, 18\
---------------------------------------------------------------------------

    \17\ The cost of the rule may be somewhat lower than estimated
to the extent that airplanes go directly into retirement at age 25
rather than converting to cargo service as assumed here. Even if an
old airplane is not due for retirement, the operator will still
retire if more economical than compliance, in which case the costs
of the rule will also be less than assumed here.
    \18\ In addition to the lower Present Value AD Cost discussed in
Section E.1, another benefit of the extended compliance time,
especially to small operators, is the increased economic feasibility
of retirement or freighter conversion as an alternative to
compliance.
---------------------------------------------------------------------------

International Trade Impact Analysis

    The Trade Agreement Act of 1979 prohibits Federal agencies from
establishing any standards or engaging in related activities that
create unnecessary obstacles to the foreign commerce of the United
States. The statute does not consider legitimate domestic objectives,
such as safety, as unnecessary. The statute also requires consideration
of international standards and, where appropriate, that they be the
basis for U.S. standards. We are issuing this final rule because of a
known safety problem and thus the AD is not considered an unnecessary
obstacle to international trade.

Unfunded Mandates Reform Act Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement
assessing the effects of any Federal mandate in a proposed or final
agency rule that may result in an expenditure of $100 million or more
(adjusted annually for inflation with the base year 1995) in any one
year by State, local, and tribal governments in the aggregate, or by
the private sector. The Act deems such a mandate to be a ``significant
regulatory action.'' We currently use an inflation-adjusted value of
$136.1 million.
    This AD does not contain such a mandate.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    We have determined that this AD will not have federalism
implications under Executive Order 13132. This AD will not have a
substantial direct effect on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.
    For the reasons discussed above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866; and
    (2) Is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979).
    You can find our regulatory evaluation and the estimated costs of
compliance in the AD Docket.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

0
Accordingly, under the authority delegated to me by the Administrator,
the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new AD:

2008-23-09 Boeing: Amendment 39-15730. Docket No. FAA-2005-20836;
Directorate Identifier 2005-NM-028-AD.

Effective Date

    (a) This airworthiness directive (AD) is effective December 15,
2008.

Affected ADs

    (b) None.

Applicability

    (c) This AD applies to Boeing airplanes, certificated in any
category, specified in paragraphs (c)(1) and (c)(2) of this AD.
    (1) Boeing airplanes listed in Table 1 of this AD, having an
original standard Airworthiness Certificate or original Export
Certificate of Airworthiness issued between July 1981 and December
1988 inclusive.

               Table 1--Applicability of Certain Airplanes
------------------------------------------------------------------------

-------------------------------------------------------------------------
                                  Model

727-200 and 727-200F series airplanes.
737-200, 737-200C, 737-300, and 737-400 series airplanes.
747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300,
 747SR, and 747SP series airplanes.
757-200, 757-200CB, and 757-200PF series airplanes.
767-200 and 767-300 series airplanes.
------------------------------------------------------------------------

    (2) Boeing Model 747-400 series airplanes, serial numbers 23719,
23720, 23814, 23816, 23817, 23818, 23819, 23820, 23999, 24061, and
24062.

Unsafe Condition

    (d) This AD results from reports of in-flight and ground fires
on certain airplanes manufactured with insulation blankets covered
with a specific polyethyleneteraphthalate (PET), ORCON Orcofilm[reg]
AN-26 (all variants, including AN-26, AN-26A, and AN-26B), hereafter
referred to as ``AN-26,'' which may contribute to the spread of a
fire when ignition occurs from sources such as electrical arcing or
sparking. We are issuing this AD to ensure that insulation blankets
constructed of AN-26 are removed from the fuselage. Such insulation
blankets could ignite and propagate a fire that is the result of
electrical arcing or sparking.

Compliance

    (e) You are responsible for having the actions required by this
AD performed within the compliance times specified, unless the
actions have already been done.

Replacement

    (f) Except as provided in paragraph (g) of this AD, within 96
months after the effective date of this AD, do the actions specified
in paragraph (f)(1) or (f)(2) of this AD.
    (1) Remove all insulation blankets from the pressurized areas of
the fuselage and install new insulation blankets using a method
approved by the Manager, Seattle Aircraft Certification Office
(ACO), FAA. The new insulation blankets must comply with 14 Code of
Federal Regulations (CFR) 25.856(a). The areas where the affected
insulation blankets are installed include, but are not limited to,
the following areas:
    (i) Crown area of the airplane;
    (ii) Areas behind flight deck panels and circuit breaker panels;
    (iii) Areas behind sidewalls, lavatories, closets, and galleys;
    (iv) Cargo compartment areas;
    (v) Air ducting;

    (vi) Waste and water tubing; and
    (vii) Areas attached to the underside of floor panels.
    (2) Remove the existing fuselage insulation blankets and install
new insulation blankets, in accordance with the Accomplishment
Instructions of the applicable service bulletin specified in Table 2
of this AD.

           Table 2--Boeing Special Attention Service Bulletins
------------------------------------------------------------------------
   Boeing Special Attention
      Service Bulletin--             Dated--            For model--
------------------------------------------------------------------------
(i) 727-25-0300...............  April 30, 2008...  727-200 and -200F
                                                    series airplanes.
(ii) 737-25-1572..............  April 30, 2008     737-200, 737-200C,
                                                    737-300, and 737-400
                                                    series airplanes.
(iii) 747-25-3429.............  April 30, 2008...  747-100B, 747-100B
                                                    SUD, 747-200B, 747-
                                                    200C, 747-200F, 747-
                                                    300, 747-400, 747SP,
                                                    and 747SR series
                                                    airplanes.
(iv) 757-25-0295..............  April 30, 2008...  757-200, 757-200CB,
                                                    and 757-200PF series
                                                    airplanes.
(v) 767-25-0411...............  April 30, 2008...  767-200 and 767-300
                                                    series airplanes.
------------------------------------------------------------------------

Exception

    (g) The actions described in paragraph (f) are not required for
any insulation blanket that is determined not to be constructed of
AN-26, using an identification method approved by the Manager,
Seattle Aircraft Certification Office (ACO), or in accordance with
Appendix A of the applicable service bulletin specified in Table 2
of this AD.

    Note 1: Insulation material that is part-marked with a date of
manufacture indicating that it was manufactured before July 1981 or
after December 1988 is not constructed of AN-26.

Parts Installation

    (h) As of the effective date of this AD, no person may install
any insulation blanket constructed of AN-26 as a replacement unless
it has been modified to comply with 14 CFR 25.856(a), in accordance
with a method approved by the Manager, Seattle ACO.

Alternative Methods of Compliance (AMOCs)

    (i)(1) The Manager, Seattle ACO, ATTN: Shannon Lennon, Aerospace
Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S,
FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW.,
Renton, Washington 98057-3356; telephone<PHONE_NUMBER>; fax (425)
917-6590; has the authority to approve AMOCs for this AD, if
requested in accordance with the procedures found in 14 CFR 39.19.
    (2) To request a different method of compliance or a different
compliance time for this AD, follow the procedures in 14 CFR 39.19.
Before using any approved AMOC on any airplane to which the AMOC
applies, notify your appropriate principal inspector (PI) in the FAA
Flight Standards District Office (FSDO), or lacking a PI, your local
FSDO.

Material Incorporated by Reference

    (j) You must use the applicable service information contained in
Table 3 of this AD to do the actions required by this AD, unless the
AD specifies otherwise.
    (1) The Director of the Federal Register approved the
incorporation by reference of this service information under 5
U.S.C. 552(a) and 1 CFR part 51.
    (2) For service information identified in this AD, contact
Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington
98124-2207; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>; e-mail
<EMAIL_ADDRESS>Internet https://www.myboeingfleet.com.
    (3) You may review copies of the service information that is
incorporated by reference at the FAA, Transport Airplane
Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the
National Archives and Records Administration (NARA). For information
on the availability of this material at NARA, call<PHONE_NUMBER>, or
go to: http://www.archives.gov/federal_register/code_of_federal_
regulations/ibr_locations.html.

               Table 3--Material Incorporated by Reference
------------------------------------------------------------------------
    Boeing Special Attention Service
               Bulletin--                            Dated--
------------------------------------------------------------------------
727-25-0300............................  April 30, 2008.
737-25-1572............................  April 30, 2008.
747-25-3429............................  April 30, 2008.
757-25-0295............................  April 30, 2008.
767-25-0411............................  April 30, 2008.
------------------------------------------------------------------------

    Issued in Renton, Washington, on October 24, 2008.
Ali Bahrami,
Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. E8-26352 Filed 11-7-08; 8:45 am]

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