orean Air Co, Philippine Airlines and other Asian carriers said time is running out for them to win insurance backing from their governments for damage caused by jets brought down by acts of war.
Insurers worldwide decided to limit their coverage to US$50 million per aircraft, down from as much as US$2 billion. While the new rules take effect today, only Hong Kong, Australia and New Zealand governments in Asia have offered to cover the shortfall.
Some Asian airlines warn flights may be canceled unless they can fill the gap and say governments are dragging their feet.
Insurers decided to slash coverage after commercial aircraft were used as weapons to destroy the World Trade Center in New York and damage the Pentagon in Washington on Sept. 11.
"If the alternatives don't work, then flights would have to be canceled"' said Philippine Airlines President Avelino Zapanta.
"Our situation is no different from the other airlines in other countries."
The company's top executives met yesterday to discuss their alternatives, such as imposing a insurance surcharge on passengers or asking for government assistance.
Governments in the US and the EU have agreed to help insure airlines, tiding them over at a time when demand for flights, particularly on transpacific routes, was already shrinking and reducing revenue.
The Hong Kong government this afternoon said it proposed covering claims for its airlines, the airport and service operators at the airport. The guarantee will commit the government to provide a maximum indemnity of US$1.95 billion to Hong Kong-based airlines such as Cathay Pacific Airways and Hong Kong Dragon Airlines Ltd in the next six months, the government said in a statement.
The government would also extend US$1 billion in coverage to 17 service providers operating at the Hong Kong International Airport, including Hong Kong Air Cargo Terminals Ltd and Hong Kong Aircraft Engineering Co. The government, which will charge a premium for the coverage offered, also said it will cover the airport authority for as much as US$1.25 billion per accident.
Cathay needs to achieve a US$750 million third-party war risk cover to satisfy requirements from leasing companies, said Tony Tyler, director of corporate communications, before the decision.
Hong Kong said the maximum claim that can be made at one time would be HK$62 billion (US$7.95 billion).
The Philippine government said it won't rush in and bail out its national carrier, which is under debt rehabilitation.
"We haven't been asked to provide financial assistance, so I haven't taken a position on it yet," Finance Secretary Jose Camacho said. "If requests are made, I want them studied first."
Philippine Airlines' Zapanta said passenger traffic for Philippine Airlines has fallen after the terrorist attacks and that only 50 percent to 60 percent of available seats are booked.
"We can't exactly say if the current traffic is totally because of the attacks as it's also the lean season," Zapanta said. "At any rate we expect traffic to slow down, and one thing we can do is hold back on bits of expansion that will happen in the next two years."
Eight of Asia's largest air carriers have lost nearly a third of their market value since the Sept. 11 attacks, with investors concerned the threat of US military action could lead to a prolonged slump in travel demand.
Delta Air Lines Inc last week said its planes are on average 29 percent full. Continental Airlines Inc and US Airways Group's US Airways said their jets are flying 40 percent full.
Korean Air yesterday said it will suspend or reduce flights on nine routes because of falling demand. Korean Air, the No. 4 cargo carrier, expects to lose 124 billion won (US$95 million) between September and December because of fewer flights to and from the US, while insurance costs are expected to swell by 98 billion won.
Korean Air and smaller rival Asiana Airlines Co have asked the government to offer insurance guarantees, approve raising fares to cover higher insurance premiums and to close unprofitable domestic routes, Korean Air said in statement. They also asked for tax breaks.
The South Korean government will discuss measures to help the carriers at a meeting today, said Korean Air spokesman William Han.
"We are anticipating a positive response from the government," said Han. "At the moment, we don't have any plans to cancel flights [because of the insurance shortfall], although the government is moving somewhat slowly."
Singapore Airlines Ltd declined to comment.
The Australian government said on Saturday it will provide US$5 billion to insure Qantas Airways Ltd and other national airlines threatened by canceled flights, while New Zealand Sunday earmarked US$807 million to insure national carrier Air New Zealand Ltd.
In the US, Congress approved the cover as part of a US$15 billion aid package to the industry.
While EU finance ministers ruled out direct financial aid they agreed to allow governments to act as airlines' guarantors for at least a month.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
STATE OF THE NATION: The legislature should invite the president to deliver an address every year, the TPP said, adding that Lai should also have to answer legislators’ questions The Chinese Nationalist Party (KMT) yesterday proposed inviting president-elect William Lai (賴清德) to make a historic first state of the nation address at the legislature following his inauguration on May 20. Lai is expected to face many domestic and international challenges, and should clarify his intended policies with the public’s representatives, KMT caucus secretary-general Hung Meng-kai (洪孟楷) said when making the proposal at a meeting of the legislature’s Procedure Committee. The committee voted to add the item to the agenda for Friday, along with another similar proposal put forward by the Taiwan People’s Party (TPP). The invitation is in line with Article 15-2