European Airlines, Airports Warn of Risks If Govt. Coverage Is Ended

September 26, 2002

European Airlines and airports were quick to protest the decision by the European Commission to end its permission for EU governments to provide supplemental insurance coverage by the end of October (See IJ Website Sept.24)

The EC announced that, as private coverage was now more readily available than it had been in the wake of Sept. 11, EU governments would no longer be allowed to fund supplemental emergency insurance covering claims related to terrorist attacks, as a number of governments have done for the last year.

In its place the EC has proposed a self insurance scheme similar to the Equitime risk retention group recently established by the U.S. airline industry, but the EU’s airlines and airports are worried that coverage will still be inadequate and/or too expensive.

According to a report from Dow Jones Newswire, Phillipe Hamon, director general of the Airports Council, which represents 450 airports in 48 European countries, stressed that the insurance market is still highly volatile, and many airports cannot obtain sufficient insurance coverage. He warned that unless the emergency measures to provide government-backed coverage were allowed to continue, many European airports might have to suspend their operations.

Although the EC may be correct in asserting that coverage is available, it certainly isn’t cheap. Swiss International Air Lines (Swiss), the company that replaced the bankrupt national carrier Swissair, has been paying its own insurance costs since December of last year. The company estimates that premiums have risen 600 percent since Sept. 11, and expects to pay around $16 million next year.

The European Airline industry claims that, if government supported plans are halted, it will be put at a competitive disadvantage vis-à-vis U.S. carriers, who have received direct government aid amounting to $5 billion, and loan guarantees of another $10 billion since Sept. 11.

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