Asian airlines are rushing to insure their planes from terrorist attacks after underwriters decided to impose a US$50 million-per-plane cap on damage caused by aircraft brought down by acts of war.
Cathay Pacific Airways executives are meeting today to ensure cover and Qantas Airways Ltd is in talks with the Australian government to make up the shortfall. Airlines have said they can't keep flying unless they fill the gap left by the new insurance rules, which take effect Tuesday.
Asia's eight largest air carriers have lost 27 percent of their market value since airliners were used as weapons to destroy the World Trade Center in New York last week. Governments in the US, Germany and the UK yesterday agreed to help insure airlines including AMR Corp's American Airlines, British Airways Plc and Lufthansa AG.
"Governments globally have little choice," said Jim Eckes, aviation industry consultant for Indoswiss Aviation. "None wants to see their carriers close down. To fly in and out of any major airport you need to show the authorites there a certificate of insurance."
Warren Buffett's Berkshire Hathaway Inc. yesterday estimated that the total cost to insurers for last week's terrorist attacks may reach US$73 billion. While it's not clear whether the airlines' insurers will have to pay part of that cost, governments may step in if they are called on to pay, Eckes said.
In the US, Congress approved the cover as part of a US$15 billion aid package to the industry. The UK government said will it set up a new insurance plan and waive premiums for 30 days. It said the model will likely be copied by other EU countries.
"We are trying to work through the problem we face with insurance brokers and our underwriters," said Tony Tyler, Cathay's executive director of corporate development. "We have kept the government informed of the problems we face. We have not asked them for assistance. That does not mean we won't."
Hong Kong's commissioner of transport was not contactable.
With a limit in damage to buildings and people on the ground, carriers would fall foul of requirements set by government regulators and the banks that own most aircraft, bringing services to a standstill, airlines said earlier this week.
Qantas spokeswoman Judith Maher said: "we're still in discussions with the government and with the aviation insurance underwriters."
The Australian government will release a statement to reporters in Canberra when an agreement has been reached.
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