EU Extends Airline Aid Deadline to June 30

May 28, 2002

The European Commission (EC), the European Union’s highest regulatory authority, has extended the scheduled end of aid programs by individual governments to Europe’s airlines until the end of June.

Following Sept.11, a number of countries established emergency programs to assist air carriers severely affected by the decrease in passengers, and the demands for terrorist coverage. The special rules the EC approved had been scheduled to expire at the end of May.

The extension of the program is at least a partial response to the $15 billion aid package that the U.S. government has made available to U.S. carriers. It also gives the insurance industry additional time to set up their own plans for terrorist coverage.

Allianz and Swiss Re have established a new insurer in Luxembourg which will offer terrorist coverage to airlines. Zurich Financial Services, PartnerRe and Hannover Re recently joined the group, and an agreement is also being worked out with Berkshire Hathaway’s warren Buffet for General & Cologne Re to participate.

The airlines have also been working on a plan to set up their own excess insurer, called Eurotime, which would cover losses between $150 million and $1.5 billion. Private insurers would take only the first layer, and the airlines are asking that governments establish programs to cover losses in excess of the $1.5 billion.

Whether the plan will be adopted or not is unclear, as many governments have expressed the opinion that the airlines should not rely on public funding in any way, even for terrorist coverage.

The issue is critical for both European and U.S. carriers, as the leasing companies, who supply many of the plane’s in the airlines’ fleets, all require that their planes be adequately insured, both against loss of the aircraft and liability claims, which can run into billions of dollars.

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