Malaysia Airlines leads with biggest aviation losses for 2014Reprints
While Malaysia Airlines has suffered two catastrophic losses this year, the aviation insurance market likely will not unduly “punish” the airline with untenable rate hikes when it renews in November, sources say.
But according to reports, the airline is losing between $1 million and $2 million a day through lost ticket sales and likely could survive only six more months if that continues.
Neither of Malaysia Airlines' losses — the still-unexplained disappearance of flight MH370 in March and the shooting down of flight MH17 in July — were caused by core operational issues, said Nigel Weyman, chairman of the aerospace division at London-based Jardine Lloyd Thompson P.L.C.
So while the airline will pay higher rates at renewal, Mr. Weyman said it is unlikely underwriters will impose unfairly high rate increases.
“The principle that the losses of the few will be paid by the many will apply to an extent,” he said.
One underwriting source who declined to be identified agreed. Since neither incident can be blamed on failures of Malaysia Airlines itself, underwriters likely will treat the company with a certain degree of sympathy at renewals, he said.
But another underwriting source, who also asked not to be named, said it remains to be seen whether the airline can survive financially — regardless of the insurance it buys.