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.