Troika scheme offers less cover for higher premiums

UK airlines are facing increased costs for third party terrorism cover under a government-backed insurance scheme.

The Troika scheme, introduced to rescue the country's aviation industry after insurers pulled cover in the wake of 11 September, will offer less coverage for higher premiums.

The scheme had been due to expire on 31 May, but was extended on Tuesday until 30 June under new terms.

Premiums for cover between $150m (£103m) to $1bn (£684m) were increased from 35 cents to 50 cents a passenger and the level at which the scheme provides cover was increased from $50m (£34m) to $150m (£103m).

The move, which could cost airlines an extra $13.5m (£9.2m) a year, was seen as a further blow.

Passenger numbers fell following the terrorist attacks and insurance costs rocketed.

Many airlines are losing money as passenger numbers, at about 90 million a year, are down about 20% on some routes.

The risk manager of one major UK airline said its insurance costs had risen by about 1,500% on some lines because of the per passenger levy.

The extension followed a prompt by the EU, which this week sanctioned member states' support for airlines for a further month.

In a separate development, questions are to be asked in parliament over the national air traffic control service's (NATS) insurance, which is due for renewal on 1 July.

Speculation that it could face severe price rises prompted fears over its financial security.

The service's finances were last week described as being "pushed to the brink" after it was prevented from raising its charges to airlines.

Liberal Democrat transport spokesman Tom Brake MP said he had written yesterday to former transport secretary Stephen Byers asking whether he had assessed the impact of higher prices and possibly reduced cover for NATS.

Byers resigned from his post on Tuesday.

The Liberal Democrats have consistently opposed last year's part-privatisation that has since seen NATS land in "financial distress", according to the Civil Aviation Authority.