The US airline industry is calling on the government to continue providing war-risk insurance to carriers for domestic operations beyond a 31 August sunset provision currently written in law.
Critics of an extension to the programme, including the US Department of Transportation, say the coverage is below market value and so gives US airlines an unfair advantage over those of countries whose governments do not provide similar aid.
The programme, which provides a $100 million act-of-terrorism liability cap, was started following the September 2001 terrorist attacks after private insurers cancelled third-party liability war-risk insurance and increased premiums for other types of coverage.
After providing coverage for more than six years, the DOT is trying to wean carriers off what it calls an indirect subsidy. "The DOT wants to ensure that government does not become a permanent supplier of war-risk insurance to US airlines at below-market prices," says the Federal Aviation Administration, which administers the programme. "The [Bush] administration believes that the best way to provide aviation war-risk insurance is through private markets."
Congress has directed the DOT to extend the programme beyond 31 August.
The DOT currently insures 75 air carriers with coverage ranging from $80 million to $4 billion per carrier, with a median liability value of $1.8 billion for an occurrence, says the FAA.
Current plans are to "gradually transition" airlines to commercial providers by allowing the FAA to increase deductibles above levels capped by law.
The International Air Transport Association says US air carriers pay about 70 cents per passenger for government-provided insurance while carriers outside of the US pay about $3 per passenger, totalling $140 million a year versus $1.5 billion. However, US carriers argue that they remain the "prime aviation target" for acts of foreign-based terrorism.
Source: FlightGlobal.com
