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Airlines call for resolution of war risk insurance problem.

SHANGHAI, June 4 Kyodo

Some 280 airlines from around the world, faced with a potential four-fold increase in their insurance premiums for 2002 and future years stemming from the Sept. 11 terror attacks, resolved Tuesday to seek a global solution to the problem.

The joint call came in a resolution passed on the third and final day of the International Air Transportation Association's (IATA) annual assembly meeting, held this year in Shanghai.

The IATA, which has since Sept. 11 been pressing for an affordable, non-cancelable and global solution to the war risk insurance issue, strongly supported a solution proposed by International Civil Aviation Organization (ICAO) last January.

It called on governments to support the proposed scheme whereby a nonprofit insurance company would be set up to offer third-party war risk liability. With multilateral government backing, the company would seek finance from the world market and assume global risks.

Immediately following Sept. 11, war risk insurance for airlines and other aviation stakeholders was canceled, though some governments extended the third-party war risk cover that was previously provided to their respective airlines and other parties pending agreement on an affordable global solution to the war risk problem.

In their resolution, the IATA airlines asked the intergovernmental ICAO to initiate measures to establish an international convention to limit third-party war risk liability of international airlines.

Former Alitalia Chief Executive Officer Giovanni Bisignani, in his acceptance speech as the IATA's newly appointed director general, said that while carriers were paying total premiums of $1.7 billion before Sept. 11, total premiums in 2002 are likely to be in the order of $6-7 billion.

''War risk insurance has become a tremendous problem for airlines around the world, and for our entire industry,'' he said.

Bisignani said IATA's members' international scheduled services are projected to lose $12 billion in 2001 and $4-8 billion in 2002.

''These numbers paint a very clear picture of the gravity of the situation faced by one of the world's most essential industries, an industry that needs far more attention from governments and international institutions,'' he said.

The IATA said Monday in its annual report that international air traffic declined by 5.7% in 2001, marking only the second year of decline in the history of modern civil aviation and helping produce the largest loss in aviation history.

In 2001, the airlines collectively lost, after interest, almost as much as they had made in profits over the previous four years combined, the report said.

Operating revenues fell from $155.4 billion in 2000 to $144.0 billion in 2001, while operating expenses grew from $149.2 billion to $153.5 billion. Passenger traffic fell a record 2.1% compared with 2000, while freight tonnage fell a record 7.7%.
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Publication:Japan Transportation Scan
Date:Jun 10, 2002
Words:457
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