Mandala asks govt to cover insurance

JAKARTA (JP): Privately owned domestic airline PT Mandala Airline has asked the Indonesian Air Carriers Association (Inaca) to petition for a government subsidy on war-coverage insurance, an Inaca executive said.

Inaca's economic commission executive Yoyok Priyowiwoho said on Tuesday that the association was currently engaged in discussions whether or not to make it an association policy.

Mandala was unavailable for comment.

Immediately after the terrorist attacks in the United States on Sept. 11, insurance companies, facing billions of dollars in potential claims, notified airlines worldwide that they were canceling existing war liability policies and limiting coverage for war and terrorist attacks to US$50 million a year.

Yoyok did not mention the amount of the subsidy asked by Mandala but he said the usual coverage was between $500 and $1 billion a year.

Many governments in Europe and Asia had agreed to provide insurance liability payment guarantees for their airlines reaching up to $2 billion.

Yoyok said that the insurers had reduced the liability coverage but not the premium, saying that the premium to insure an aircraft was between 0.8 percent to 1 percent of the total coverage per year. The liability coverage depends on the type of aircraft.

"For the same liability coverage, the premium would be greatly increased," he said, adding that Indonesia's high risk of war would likely prompt insurers to ask for even higher premiums.

Yoyok said that the airlines would be taking a big risk in flying their aircraft without adequate insurance coverage, but that airlines would rather take the risk than be totally grounded.

"So far no Indonesian plane has ever been destroyed or shot down because of war or terrorists," Yoyok said.

It was not yet clear whether the government would be asked to subsidize the premium for a higher liability coverage or to give a guarantee for the risks not covered by insurance, he said.

Yoyok, who is also manager for marketing analysis at state- owned PT Merpati Nusantara Airlines, said that Merpati had no intention to present its own petition to the government.

"With the government's current financial situation, it would be difficult," he said.

Merpati spends between $3.5 million and $4 million in insurance premiums each year, Yoyok said, adding that the company's planes were insured by Lloyd London.

Separately, national flag carrier PT Garuda Indonesia's vice president for corporate communications Pujobroto said that as of Oct. 1 the company's premium payment would be increased, but that it would not affect ticket prices.

Premium on passengers, cargo and baggage will be increased by $1.25 a passenger, he said, adding that the company spends between $8 million and $9 million on insurance premiums each year.

Pujobroto said that he did not know whether Garuda would follow Mandala's move in asking for a government subsidy on war- coverage insurance, as he had yet to be informed about the management's policy on the issue. (tnt)