AIRLINES CLAIMS HIGH INSURANCE PUSHING UP FARES

THE airline industry's discussion on how to solve the Balearics' air transport problems entered its second day yesterday with airline bosses gathering in Palms to discuss the situation with the local politicians. One of the biggest problems for Spanish airlines is that over the past three years, insurance costs have risen by 600 per cent, especially since September 11, and the price of fuel has gone up by 30 per cent with further rises expected if the United States attacks Iraq. The high operating costs are the main reason why some of the airlines, in particular Air Nostrum, part of Iberia, and the operators of the bulk on inter islands flights, are against the routes being declared a public service and airlines will have to bid for the routes by offering the lowest fares, which is not practical for the airlines. The answer, greater discounts “of 50 per cent or more” for Balearics residents as the government wants. However, Spanair's regional airline Aebal, if given the chance to operate routes exclusively, believes it could reduce average fares from 90 euros one way to around 70. But Air Europa is worried about domestic and especially inter-island flights becoming a monopoly and believes that greater discounts would also encourage more people to fly. Partido Popular Balearic senator, Rosa Estarás, said that her party, should it win the May elections, has not ruled out declaring some routes a public service. Estarás said that the Balearics is missing out on the radical changes in the European airline industry, such as the no frills revolution which has brought prices down.