Fuel Prices Not To Blame This Time
The War Risk Insurance
Program, a little known government-sponsored project that helped
American air carriers resume their schedules after 9/11, is about
to lapse. If it does, you will be paying more for your
ticket and not because of the rising price of jet fuel.
Just weeks after airlines lost millions of dollars because of
cancelled schedules and fearful flyers, the FAA authorized a system
where the airlines could purchase insurance from the government at
a fraction of what commercial carriers would be forced to charge,
if they even agreed to provide coverage at all.
Considering the enormous cost that insurance actuaries
calculated the premium would be in the immediate aftermath of the
tragic loss of life and historic economic loss, the government
program was the only realistic way for planes to start flying their
While war-insurance is not strictly required, going without is
simply not an option because banks and financiers would repossess
their multi-million dollar aircraft at the speed of
The program was scheduled to expire on August 31, but Maria
Cino, acting U.S. Secretary of Transportation authorized an
extension til the end of 2006. She has the discretion to extend it
one more year, but beyond that, the program requires congressional
government insurance may not continue beyond this year because the
European Union considers it an unfair government subsidy and many
private insurance carriers and free-market advocates regard it now
as a form of corporate welfare.
Currently, the airlines pay a combined premium of around $140
million against what most experts believe would be a commercial
rate of $600 to $700 million.
"It's very definite that if the airlines are forced to pay
higher premiums, the cost is going to be reflected in higher fares
to passengers," said Shalem Massey, an aviation industry attorney
based in California, to Newsday Magazine.
Industry experts estimate that the average round-trip ticket
price could increase up to $40. Others say the sky could be the