Garuda seeks aid to avoid grounding

Garuda seeks aid to avoid grounding

By Tantri Yuliandini

JAKARTA (JP): National flag carrier PT Garuda Indonesia has
sent a letter to the government requesting financial support
against possible grounding at overseas destinations due to
insufficient insurance coverage, a senior executive said.

The plea came in response to the global aviation insurers'
decision to limit liability coverage for injury and damage to
people and property on the ground from terrorism, hijacking, and
other war risks.

Garuda's vice president for corporate communications Pujobroto
said on Wednesday that the airline had sent a letter to the
Ministry of Finance on Tuesday and would follow it up with a
series of meetings with the government.

"Reflecting on the seriousness of recent developments in the
industry, I think it logical that Garuda should also ask the
government for a guarantee," he told The Jakarta Post.

Pujobroto said that the state-owned airline had not presented
the government with any figures and that it would discuss the
details with related ministries, including the state ministry for
state enterprises.

Airlines around the world have been turning to their
respective governments for help after insurance companies decided
to cap third party war and terrorism insurance at US$50 million
from the previous $2 billion maximum.

Aviation analysts said the minimum coverage should be $750
million.

Without adequate insurance coverage, the airlines face the
likelihood of being grounded, as the U.S. and some other
countries plan to restrict the flights of airliners that do not
have sufficient insurance.

Separately, Garuda's director of finance Emirsyah Satar was
reported by Dow Jones newswire as saying that at the moment the
airline was operating normally as airports around the world had
yet to refuse access to carriers with insufficient coverage.

He said that Garuda had taken out a policy that provided
coverage of up to $150 million with an insurer in London, and was
currently negotiating for an additional policy that would extend
the coverage to $750 million.

The Indonesian Air Carriers Association (Inaca) said that
Indonesian airlines had been given notice from insurers that as
of Oct. 1 they would increase their premium fees.

Inaca chairman Wahyu Hidayat said that the insurance premium
fees were to increase by 0.05 percent of the total coverage from
the previous 0.01 percent a year, and an additional increase of
$1.25 for each passenger. In the meantime the liability coverage
was reduced to only $50 million from the previous $500 million,
he said.

Wahyu told the Post that the association had yet to decide on
petitioning the government for support, and that it would hold
extensive talks with its members before moving to do so.

He said that the association would like the government to
subsidize the premium for higher liability coverage, but "We
realize that it will be difficult for the government to grant a
guarantee, if it (the government) has no money.

"You know yourself how the government had to beg to obtain a
mere $400 million from the IMF," Wahyu remarked.

Earlier an executive of the association said that privately
owned domestic airline PT Mandala Airline had asked Inaca to
petition for a government subsidy.

Wahyu admitted that the $50 million coverage would not be
enough to cover the risks taken by airlines, but that Indonesian
airlines could not afford to cease operations altogether.

And the risk of having insufficient insurance coverage "was
better than being grounded and not making any money at all,"
Wahyu said.

The director of finance of PT Merpati Nusantara Airlines,
another state-owned airline, Budiman Rafioedin said that as a
result of the premium increase a price increase for tickets was
unavoidable.

"Maybe not immediately in October, but in one or two months
time," he said, adding that there would likely be an increase of
about Rp 15,000 ($1.60) a ticket.