Aid and Insurance for Europes Airlines

Costs suffered by airlines following the attacks of 11 September 2001 - The European Commission authorises the aid proposed by Germany

The Commission continues to take steps to counteract the repercussions of the attacks in the United States on the air transport sector. After having approved similar aid for France and the United Kingdom(1), it has just authorised the scheme to compensate German airlines for losses caused by the closure of some areas of airspace between 11 and 14 September 2001. The amount of this regime is € 71 million.

The Commission`s decision is fully in line with its Communication of 10 October 2001 on “The repercussions of the terrorist attacks in the United States on the air transport industry”`(2). The Commission had accepted in this Communication that some types of aid, including aid for insurance and losses suffered through the closure of airspace, or “aid to make good the damage caused by natural disasters or exceptional occurrences” (in the words of the EU Treaty), could be granted to the air transport industry by way of exception.

The Commission had nonetheless placed a number of conditions on the authorisation of such emergency aid schemes. The German scheme meets all these conditions:

* it will compensate only the costs incurred during those four days as a result of flights cancelled or delayed by the national authorities;
* it is based on an objective calculation of loss of income, account having been taken of costs avoided and of additional costs, during that period;


p>* it applies without discrimination to all German airlines.
The Commission is continuing to examine the compatibility of other emergency aid schemes notified by other Member States.

Also, in a Communication adopted today, the Commission assesses developments in the air transport insurance sector after airlines were left without insurance in the aftermath of the 11 September 2001 terrorist attacks in the US. The Commission welcomes developments in the air transport industry to establish a mutual insurance scheme, both at international and at European level. Until the Commission completes, in time for the October Transport Council, its analysis(1) of opportunities arising in the commercial insurance sector and its examination of the possible establishment of a mutual fund scheme, Member States may opt for an extension of current government insurance schemes(2). These measures must be duly notified to the Commission.

The Commission`s Communication presents an update of developments in the insurance market and undertakes a first assessment of the various initiatives undertaken by the insurance and air transport industry at European and international level. Taking into account the conclusions of the 17 June Transport Council, the Commission`s approach towards a possible way forward is set against the following criteria: the commercial insurance market should not be unnecessarily restricted; government exposure should be limited as much as possible and mutualisation schemes should be thoroughly assessed.

Commercial market solutions should be fully explored. Particular attention needs to be paid to the continuous application of the 7 days standard cancellation clause which permitted insurance companies to cancel their cover and is at the source of the crisis situation which developed in the insurance market after the 11 September. A similar event would again require governments to step-in. A mutual solution without government intervention but private investor involvement may be envisaged as well.
Current government insurance cover may continue for another four months until 31 October 2002 to provide for stability whilst the EUROTIME and ICAO scheme are under examination. Any prolongation of the cover however needs to be notified to the Commission for authorisation.

The Commission intends to propose two new legislative proposals in the next months on air transport insurance issues: a proposal dealing with minimum insurance levels for the issue of operating licences and a proposal on a possible compensation fund for extreme damages exceeding insurable risks.
(1) At the last Transport Council meeting on 17 June, the Commission was invited to further monitor opportunities in the commercial insurance sector, to examine the possible establishment of a mutual fund sheme and to present its analysis at the next Transport Council meeting in October 2002.
(2) Most Member States have introduced a temporary government based cover for risks of war and terrorist acts, still in place today, and due to expire on 30 June 2002.Related Stories:Competition Concerns About Co-operation Agreement Between Air France and Alitalia