Hong Kong carriers face grounding

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Cathay Pacific and other carriers face the prospect of grounding all international flights after insurers said they would cap third-party war and terrorism insurance from tomorrow. Insurers slashed their cover following the September 11 attacks on the US.

Cathay Pacific, Dragon Airlines and Hong Kong's airport authority have held emergency meetings over the weekend to find a solution.

According to newspaper reports from Hong Kong, insurance for the airlines will be capped at $50m, much lower than the $1bn Cathay Pacific claims it normally carries.

As yet, the Hong Kong government has not stepped in to back the airlines, as other governments, such as the US and UK, have done in recent days. But a senior minister has said the government may propose to underwrite airlines' war cover, but added that private insurers would also have to get involved.

Meanwhile, All Nippon Airways could be the first Japanese carrier to join the industry-wide plea for public funds. Passenger numbers on trans-Pacific flights have fallen 30% in September and the airline's profitability is expected to be severely affected by the crisis.