Search the Internet          Tips  Sites: Finance, Investment

Government extends airline war cover, opposes surcharge

The government said on Wednesday it has extended third-party war risk insurance cover for state-run airlines until the end of the month and would investigate an insurance surcharge put on fares by two domestic airlines.

"We are questioning them about their legal right to impose a surcharge on passenger tickets. The government wants to know in whose kitty the surcharge money is going," a senior government official told Reuters.

Indian Airlines and privately-owned Jet Airways, which together control almost 90 per cent of the domestic airline market of 13 million passengers, have imposed a surcharge of Rs 100 or $2 per ticket.

Long-haul carrier Air-India has also asked the government for permission to impose a $5 surcharge on airline tickets.

Airlines around the world started levying a surcharge to meet part of the additional premiums charged by insurance companies following the hijacked plane attacks in the United States.

Insurers have not only increased premiums but also imposed a cap on third-party war risk liability cover at $50 million.

Most airlines passed on the surcharge to passengers and turned to their respective governments to provide adequate third-party war risk cover.

INSURANCE COVER EXTENDED

The government duly gave the country's state-run airlines, Air-India and Indian Airlines, guarantees to cover war risk for 15 days after the insurance was capped.

The cover has now been extended until October 31.

Air-India, with a fleet of 27 planes, is covered for $1.5 billion for a single incident of damage from war or terrorism on the ground, while Indian Airlines, with 55 aircraft in its fleet, has $500 million cover per incident.

But Jet Airways, India's fastest growing airline with a fleet of 29 aircraft, has yet to get a government indemnity.

The private airline, which carried an insurance cover of $750 million per incident before the cap, has arranged for a war risk cover of $150 million from insurance companies. It has asked the government for an insurance cover guarantee.

YOU MAY ALSO WANT TO READ:
The Attack on US Cities: Complete Coverage

Tell us what you think of this report