Aviation War Risks Insurance

Until the events which occurred on 11 September 2001 in the United States, Qantas was indemnified under its Aviation Liability Policy in respect of war risks (which include acts of terrorism and hijacking) for a limit of US$2 billion (for any one event).

Most airlines (including all Australian and US carriers) have a strict and unlimited liability for injury to persons or damage to property on the ground.

Aviation insurance underwriters have issued a 7 day Notice of Cancellation of war risks insurance cover to all airlines. This Notice is effective from 25 September 2001 and applies to all international carriers.

Insurers may provide limited war risk cover to airlines which they consider to be a good risk. Qantas will fall into this category.

Qantas has been advised that this new cover will be restricted to liability for:

* death or injury to passengers on the aircraft (limited to US$2 billion per occurrence); and

* death or injury to third parties and property damage on the ground (limited to US$50 million for any one event and in aggregate).

A US$1.25 surcharge per passenger per flight will be imposed by the insurers for this cover. This amount will be added to the ticket price as a separate charge.

Qantas continues to negotiate with its aviation insurance underwriters to determine if the above limits can be raised.

Qantas also is discussing the issue with the Australian Government to determine what action the Government will take to ensure the ongoing viability of the Australian aviation industry.