Asian governments bridge airline insurance gap

Asian governments bridge airline insurance gap Reuters Singapore

Asian governments stepped forward to bridge an insurance gap for their airlines, joining their counterparts around the globe scrambling to keep their carriers aloft ahead of sharply reduced war risk protection.

The potential grounding of planes worldwide caps nearly two weeks of turmoil triggered by the Sept.11 airborne assaults on the United States that has cost billions of dollars in losses and as many as 100,000 layoffs. Nearly 7,000 are feared dead in the attacks.

Europe's provision of a month's worth of backup insurance coverage to its carriers was small relief.

The region's biggest airline, British Airways, said on Sunday it was considering a range of options to raise cash, including the sale of property, if losses from the attacks in the United States grew.

A spokesman said the sale and leaseback of its new Waterside headquarters near Heathrow airport was one option for the carrier, which is more dependent on North Atlantic business than many rivals.

But he played down newspaper reports that it had already begun to prepare such a move to boost cash reserves in the face of falling passenger numbers.

The deal would be likely to bring in around 2 billion pounds (US$2.9 billion).

Global insurers will cap third-party war and terrorism insurance from midnight GMT on Monday at $50 million covering death or injury on the ground for airlines considered to be "good risks".

But that figure is considered inadequate since most airlines have unlimited liability for such injuries and damage. Without government backing, a number of carriers could have been grounded on Tuesday.

Governments in Australia, New Zealand and South Korea have offered to back up their airlines' insurance coverage. Hong Kong is expected to do the same on Monday.

Chinese airlines said on Monday they expected government help to manage higher insurance costs after the attacks on the United States, but added that the impact on them was likely to be limited.

Asia's largest capitalized airline, Singapore Airlines, among the most cash-rich in the world, would not comment on whether it is seeking government help.

"The matter is receiving attention. We expect our services to operate as normal," a spokesman said.

In Hong Kong, shares of flag carrier Cathay Pacific Airways slumped 0.79 percent at HK$6.25 by midday Monday after sinking 3 percent earlier on worries that its $1 billion insurance cover would be inadequate and ground its planes.

On the other hand, South Korea's Korean Air Co Ltd, the nation's largest carrier and second-ranked Asiana Airlines gained nearly 3 percent and about 4 percent, respectively on Monday, after the government agreed to back up their insurance needs.