Insurance ruling threatens airlines

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A huge rise in the cost of insurance cover for war and terrorism risks could result in the ruin of UK and other European airlines, aviation experts have warned.

From the end of October, the European Commission is to end an emergency scheme under which EU member states underwrite airlines' war-risk insurance.

The move means European airlines will have to pay full commercial rates for the first time since the September 11 attacks.

The attacks last year exposed airlines' potential liability for losses on the ground, highlighting the possibility of claims from families and businesses for the loss of people and property.

Previously Europe's airlines could only obtain third party war risk cover if the government agree to underwrite the policies, effectively to pay out in the event of a claim.

The EU granted an extension to allow national governments to underwrite the insurance in July, but it says airlines should not need the help of governments any longer.

Critical implications

The extension followed a similar move from the US Government.

Many believe the huge leap in costs is likely to be more than some struggling airlines can afford.

Aviation expert Annie Redmile told the BBC that it could have critical implications for the industry and will mean financial ruin for some companies.

"Some will go down, I think, " she said.

"Some even bigger carriers could go down."

In September, trade unions at United Airlines in the United States offered to accept $5bn in cost cuts on staff, including pay cuts, to try and save the firm from bankruptcy.

The airline's top management had warned that the second biggest US carrier could not survive without sweeping cost cuts.

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Looks like we might see some more bankrupties and this is a very good time for Osama Bin Laden to reattack and wipe out alot of airlines because rates would be extraordinaraly (cant spell) high if he did reattack

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