Garuda says all flights are fully insured
Tantri Yuliandini, The Jakarta Post, Jakarta
National flag carrier Garuda Indonesia has secured coverage for its third-party war and terrorism liability insurance up to a maximum of US$1 billion without government support, a senior executive said.
Garuda's director of finance Emirsyah Satar said on Wednesday that the company had moved to cover the insurance with agencies in London immediately after the government declined to underwrite the airline.
"It is, of course, up to the shareholder (the government) to make that decision," he told reporters on the sidelines of a ceremony marking a collaborative venture between Garuda and PT Bank Central Asia (BCA).
The national airline had earlier asked for government support following the shortfall in its insurance coverage.
Insurance companies around the world cut back airline liability coverage for injury and damage to persons and property on the ground resulting from terrorism, hijackings, and other war risks immediately after last month's terrorist attacks on the U.S.
The companies limited their coverage to a maximum of $50 million instead of the usual maximum of $2 billion immediately after the attacks, causing many airlines around the world to appeal to their respective governments for additional guarantees.
Without adequate liability coverage, the aircraft would be banned from flying both by the lessor of the aircraft and the designated airports.
The government, however, said on Tuesday that it would not guarantee the shortfall due to its limited financial capabilities and the fact that adequate coverage on the insurance market had become available again.
Emirsyah admitted that Lloyds of London were once again providing insurance coverage of up to $1 billion, whereas there had been none available immediately after the attacks.
"Last week, there was no coverage for $1 billion available on the market in London. But there is now, so we've gone back to the market," he said, adding that Garuda's insurance broker was EON London.
However, the higher coverage meant higher premiums, meaning that the extra costs would be added to the price of airline tickets, Emirsyah said.
But he added that Garuda had yet to decide on whether to impose surcharges on its international or domestic passengers.
Global insurers had raised premiums per passenger for third- party war and terrorism insurance to $1.25 for coverage worth $50 million. For coverage up to $150 million, an additional 35 U.S. cents was added to the premium, and another $1.50 for coverage up to $1 billion.
Therefore, a surcharge of approximately $3.10 per passenger would be needed to cover the insurance premium.
Emirsyah said that Garuda needed to pay additional premiums of between $20 million and $25 million per year for liability coverage of up to $1 billion, besides having to pay about $10 million a year for hull liability. The premiums were paid in quarterly installments, Emirsyah said.
He said that it was not yet certain when the airline would start imposing the surcharges.