Many an airplane passenger has been puzzled by the presence of ashtrays in airplane lavatories. Despite the fact that smoking on commercial airliners was progressively phased out between 1979 and 2000, you’ll still find every lavatory on every commercial airliner run by a U.S.-based company properly equipped with a functional and fire-safe ashtray.
This feature, despite the complete ban on tobacco products, stems from the 1973 crash of Varig Flight 820. The flight, between Rio de Janeiro, Brazil and Paris, France, was forced into an emergency landing approximately three miles short of the airport as the result of a fire started by a cigarette improperly disposed of in the airplane’s rear lavatory. There were 123 casualties and only 11 survivors.
In reaction to the tragedy, the FAA began requiring every U.S. airliner to install signs prohibiting smoking in the lavatory, but also to include a proper place to dispose of cigarettes in the event that a passenger disregarded the rules deciding, wisely, that it was better to deal with the rule breaker after a safe landing than to risk another in-flight fire.
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Source: How-To Geek