When the price of aircraft and passenger insurance rises, operators are largely responsible

for swallowing the extra costs. Only a small percentage can be charged to the client as part of

the charter price.

And when the number of hours flown decreases, such increases in overheads are felt all the more acutely.

After September 11, all insurance companies cancelled their third party legal liability for war and terrorism risks. The German government guaranteed up to a total of US$20 billion for war and terrorism risks for a few months.

Insurance companies did not cancel existing contracts and the fees were not increased. But all companies which have taken new contracts have experienced extreme rising prices.

On August 1, 2002 the German government changed aviation law (LuftvG) concerning insurance. The most important changes were the conversion from German Marks into euros and as a result of the terror acts, the change of sums for the Third Party Legal Liability, Passenger Legal Liability and Passenger Accident Insurance. These changes also came to pass in other countries in Europe.

Before September 11, insurance prices were calculated as a fixed rate in our hourly charter prices.

But after this date, it wasn’t easy to calcluate the necessary rise in charter prices. The increased insurance prices were between 35 and 50 per cent depending on the value of the aircraft, the fleet and how many pilots were flying for each aircraft.

For us, prices increased 43 per cent and we were forced to raise the hourly charter price for our aircraft. But we could not increase the prices by 43 per cent!

We decide to raise our prices from the beginning of October by two per cent. This is not very much and the onus now falls on us to fly lots more flight hours with our aircraft.

Most companies have not included war and terrorism risk in their insurances policies. So if a customer would like to fly to a country in which this insurance is necessary, he must pay extra for his flight. This could amount to thousands of euros, depending on the destination.

While smaller operators have had to put up their charter costs, big operators have had the comparative luxury of putting these extra costs into their fares or charging extra fees as security charges. Due to

their flying hours – and this is a matter of fact – the big airlines have been able to absorb the rising insurance costs. The effect of the rising insurance prices on large operators has not been as serious as it has for small operators in the general aviation industry.

In my opinion, there have been fewer orders for general aviation aircraft more as a result of the decreasing economic situation in Germany and Europe, and less as a result of rising insurance prices. Nevertheless, because of the decline in flying hours, rising insurance prices have affected general aviation in a very negative way.

Andres Mundsinger, GM, Stuttgarter Flugdienst