Taiwan's airlines will remain covered for third-party losses after the Cabinet yesterday approved a two-month extension of the government's insurance guarantee in light of the war or terrorism, officials said.
The government made it clear, however, that the bailout was only a stopgap measure to give airlines time to find private coverage, suggesting that those that can't may have their routes cut.
The government in late September agreed to assume third-party liability for 30 days after insurers worldwide dropped their maximum coverage to US$50 million from over US$1 billion in the wake of the Sept. 11 attacks.
The government's guarantee is set to expire on Oct. 25, at which time the extension will immediately take effect.
Under the conditions of the extension, which must now be approved by the Legislative Yuan, the government will continue to be liable for up to a maximum of US$1.7 billion in claims per incident for Taiwan's airlines.
The government has encouraged the airlines to seek insurance in the private sector and has reserved the right to cancel its assumption of risk as soon as adequate coverage is found, according to an official at the Ministry of Transportation and Communications.
Paul Wang, (王振畬) spokesman for China Airlines (華航), Taiwan's largest carrier, said that in light of current conditions insurers aren't making many suitable offers, and those on offer are extremely pricey.
The relatively short duration of the extension is part of a plan by the transportation ministry, which submitted the proposal to the Cabinet, to avoid making airlines too reliant on government coverage.
The local Chinese-language media quoted Chang Chia-juch (
"If one airline finds private coverage while another cannot, then under the principles of market fairness the ministry may consider cutting the routes of the airline without [coverage]," said Chang.
But Alex Shih, (
"Airlines shouldn't be forced to pay high premiums just to avoid having their routes slashed," Shih said.
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