Government decision due on underwriting Garuda

Government decision due on underwriting Garuda

Tantri Yuliandini, The Jakarta Post, Jakarta

The government will need one or two days to decide whether or
not to agree on a guarantee scheme to underwrite war and
terrorism insurance coverage for national flag carrier Garuda
Indonesia, a senior official of the Ministry of Finance has said.

Director general of financial institutions Darmin Nasution
said on Monday that the government had first to verify the
information on how urgent the airline needed the guarantee, and
whether the guarantee was unavoidable.

"We need to know whether there are other options or whether
there are new developments in the market; I can't tell you what
(the government) will decide right now," he told reporters
outside a hearing with the House of Representatives committee on
the state budget.

Darmin admitted that the new insurance coverage would not be
adequate to cover all the damage if an accident happened due to
war or terrorism, and that without the government's guarantee the
state-owned airline might be banned from flying.

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 coverage at US$50
million from the previous $2 billion maximum.

Aviation analysts said the minimum coverage to be provided by
the government should be around $750 million.

Garuda sent a letter to the Ministry of Finance last week
requesting a guarantee.

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

"We realize that in guaranteeing the coverage we don't need to
immediately set aside the funds ... but simply need to say how
much we would be willing to pay if anything were to happen" he
said.

However, he could not determine how much the government was
willing to guarantee to Garuda, saying that it would need further
discussion to decide.