Passengers facing charges on flights to cover insurance costs

Internal links

BA's expected £200m loss forces it to compete with no-frills airlines

Airline passengers face the prospect of extra surcharges on their flight tickets to help cover the costs of insurance under a plan being put together by the European Commission.

The Commission is considering setting up a mutual fund to cover both war and terrorism risks – something insurers have refused to underwrite since the terrorist attacks in the US on 11 September.

"We shall study the possible creation of a mutual fund financed through payments collected from airline passengers," EU Transport Commissioner Loyola de Palacio told the World Economic Forum in New York over the weekend.

Mr de Palacio said the mutual fund would operate with support from the insurance industry and, initially, with a guarantee from governments.

The extra surcharges would come on top of security surcharges already imposed by certain airlines.

British Airways imposed a £2.50 surcharge on passengers last November to help recoup some of the costs of extra security and insurance measures.

The airline said more than 124 carriers worldwide had introduced similar increases. Among British-based operators, these include Go and Ryanair.

Following the US terrorist attacks, commercial insurers withdrew third-party liability aviation insurance for acts of war and terrorism, forcing governments to step in to provide the cover needed to keep airlines flying. The British government recently extended its emergency air insurance package to 20 March, to give the industry more time to make alternative arrangements.