As I understand it, the government intervened to provide insurance for the
airlines. Prior to September 11, each plane was insured for $1.5 billion.
After September 11, insurance companies were willing to offer only about
one-third of that sum for each plane. The market for risk would have shut
down the airlines had the government not provided the insurance. Some part
of the $15 billion bailout is that insurance (which the government is still
providing for next couple of weeks or so).
The insurance companies now say annual premiums for airlines will go up in
the range of $1.5 to 3 billion. Leaders of some of the companies are now
arguing that the federal government should pay part of those premiums.
Just after September 11, airline executives estimated that the government
shutdown of airports cost them $300 million each day for four days. They
initially requested $24 billion in public assistance and settled for $15
billion. The National Journal reported that even K Street types were
astonished by their chutzpah.
John Samples
Cato Institute
