Mon, Mar 17, 2003
Related Industries Also Severely Affected
Airline service companies face "significant
challenges" given the critical financial condition of the
airlines. That word from Sally Leible, co-chair of the
National Air Transportation Association's Airline Services Council
and president of Airport Terminal Services, testifying before the
House of Representatives Subcommittee on Aviation last week. The
Committee is considering the reauthorization of the , which was
holding hearings on reauthorizing the Federal Aviation
Administration's war risk insurance.
Little Coverage For A Lotta Dollars
"Congress should consider expanding the FAA's war
risk program to provide coverage for airline service vendors,"
stated Leible. "A low level of coverage is commercially
available, approximately $50 million per year aggregate, but the
premiums are prohibitively expensive. One company was quoted
a $5 million annual premium for $50 million in coverage.
Given the potential significant losses from an event, this level of
coverage is of little value. As a result, we find ourselves
in much the same position as when all coverage was cancelled in
Although Congress recognized the significance of this issue when
it included language in the Homeland Security Act requiring the FAA
to report on war risk coverage for airline services vendors, the
report is still under review by the federal government.
Will Airline Vendors Be History?
"Given the critical nature of war risk insurance
to our continued ability to operate - not to mention the carriers
themselves - we respectfully request that Congress consider
expanding the FAA's war risk program to provide coverage for
airline service vendors," stated Leible.
Airline bankruptcies was another point raised by Leible in her
testimony. "While a company may still receive payments for
ongoing operations following a bankruptcy filing, they could see up
to 90 days of revenue frozen with little chance of recovery,"
stated Leible. "Too often, these companies are expected to
continue providing services to airlines that have no way to fulfill
their contractual responsibilities. Eventually, they are
forced to settle for pennies on the dollar."
While Leible admitted that bankruptcies are a risk of doing
business, "We often find that we are the lowest priority when it
comes time to pay pre-bankruptcy debts. While reform of the
bankruptcy process is outside of the scope of these hearings, we
would urge the Congress to keep in mind these challenges for our
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