Passengers may soon be asked to pick up the full tab for higher insurance premiums resulting from the Sept. 11 terrorist attacks and war in Afghanistan.
In the wake of the attacks, insurers around the world raised premiums for airlines. Taiwan's government stepped in to offer additional coverage for the nation's two major airlines, China Airlines Co and EVA Airways Corp. But that coverage is set to end on Dec. 25, and the higher insurance premiums may be passed on to passengers.
The Ministry of Transportation and Communications said yesterday that it won't continue to provide war-risk insurance coverage to Taiwan carriers.
The government in late September said it would cover liabilities of more than US$50 million after insurers refused to provide full insurance coverage against war-related damages. That agreement was to be in effect until Oct. 25, but was later extended to Dec. 25.
In addition, earlier this year, the government agreed to allow China Airlines and EVA to add a surcharge of US$2.50 to fares to pay for higher insurance premiums. Taiwan's four domestic carriers were allowed to add a surcharge of NT$60.
"The ministry has agreed in principle to allow airlines to pass the possible rate hikes on to passengers," Alex Shih (施建華), secretary-general of the Taipei Airlines Association, said yesterday. The association represents the nation's six carriers.
Taiwan's carriers are struggling to stay aloft, with demand for air travel and cargo services hurt by the economic slowdown in the US. The Sept. 11 attacks exacerbated the trouble the airlines face.
Shih said the association would propose new rate hikes to the ministry's Civil Aeronautics Administration on Monday. "It's really a heavy financial burden for Taiwanese airlines if the government stops supporting the temporary coverage," Shih said.
According to Shih, rates for war-risk insurance have increased 90-fold since the terrorist attacks. "In the past we paid less than US$1 million in premiums for insurance coverage of US$1.5 billion," Shih said. "Now we're paying US$90 million for coverage of just US$1 billion."
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