Officials at the Department of Public Enterprise are examining the possibility of providing indemnification for all Irish airlines against specific war risks arising out of the terrorist attacks in the US, a spokesman said yesterday.
He was responding to concerns that flights could be grounded from midnight on Monday following notice to world airlines that insurers intended to cancel or severely restrict third party cover for war liabilities. A Government decision would be required to bring in a specific indemnity scheme, he said, adding that this would be taken as soon as possible.
"We are acutely aware of the importance of aviation and the issue of airlines not being able to fly and are addressing the issues," he said.
Keeping European airlines in the air was discussed at the European Council meeting in Brussels last night and would be discussed at today's meeting of European finance ministers, he said.
The British and German governments have already moved to ensure that their airline companies are not grounded by the new insurance restrictions. Germany said late on Friday it would assume the extra liabilities related to war risk faced by German airlines following changes in their insurance cover. It will meet on Monday to consider indemnifying German airlines for possibilities liabilities of up to €20 billion (£15.8 billion) for war and terrorism related to the current crisis. It would seek "a common stance at European level" on the issue, it said.
The UK government appears to have averted the crisis by agreeing to pay temporarily for extra insurance cover for aircraft through a partnership between government and the insurance industry. The deal with the government will give the airlines enough third-party cover to ensure they do not breach contracts with aircraft leasing companies and banks, which demand at least $700 million (€765.5 million) third-party cover per aircraft. The extra third-party cover will be issued by Global Aerospace, a consortium of insurers and reinsurers, and paid for by the Treasury.
Airline insurers including Munich Re, Swiss Re and Lloyds of London syndicates have reviewed airline cover following the terrorist attacks on September 11th. They are now only prepared to offer third-party war indemnity cover of $50 million. Airlines say cover of $750 million is required under the terms of their agreements with aircraft lessors. This third-party insurance covers liabilities for damage or injury to third parties on the ground caused by an aircraft hit in war or by terrorism.
Aer Lingus, which arranges its insurance through brokers Marsh in London, said it was confident that it could maintain full services on Tuesday despite the notice of withdrawal of war-risk liability insurance. It said it had made representations to the Government seeking indemnity for liability risk in excess of that available from the aviation insurance market.
Ryanair chief executive Mr Michael O'Leary said he was confident the issue would be sorted out. "It is in the interest of the insurers to sort it out. I am confident the EU and US governments will sort it out by putting indemnity in place for amounts between $50 million and $750 million for a period. We will have a full service in operation on Tuesday," he said.
Insurers have already informed airlines of a $1.25 surcharge per passenger per sector from October 1st. Aer Lingus said this could cost the airline some £10 million in a full year but it would be passed on directly to passengers.
Leading insurers and reinsurers are facing total losses of at least $17.5 billion dollars from the terrorist attacks in the United States, according to credit rating agency Standard and Poor's. But the agency said that figure could rise significantly.
