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Tuesday, 18 September, 2001, 11:41 GMT 12:41 UK
Airlines suspend Sri Lanka flights
Destroyed plane on the runway at Bandaranaike Airport
Insurance premiums soared after last month's airport attack
Two airlines have suspended services to Sri Lanka after a massive increase in war-risk insurance on flights to Colombo.

Gulf Air is suspending flights to a result of the prohibitive cost of insuring its aircraft and passengers on the Sri Lankan route

Airline statement
Bahrain-based Gulf Air and Dubai-based Emirates Airways announced the suspension would take effect from Tuesday.

Underwriters have raised premiums by about 300% following last week's terror attacks in New York and Washington.

War risk

The increase adds to an existing war-risk rate imposed after a suicide attack on the airport in July by Tamil Tiger rebels.

Sri Lankan beach
Sri Lanka's tourism industry has been heavily hit
The attackers destroyed four civilian passenger aircraft belonging to SriLankan Airlines and damaged two others.

Gulf Air said in a statement it would re-route passengers travelling to Colombo via intermediary destinations.

Emirates said it fully intended to reopen its Sri Lanka service "as soon as normality returns to the insurance market".

'No precedent'

The world's airlines are beginning to count the almost incalculable cost of disruptions following last week's attacks.

"All you know is it's going to be worse than anything which you could benchmark it against," Hong Kong-based CSFB airline analyst Peter Hilton told Reuters.

"There's just no precedent," he was quoted as saying.

The government of Sri Lanka was already looking for new international loans to cope with a sharp slowdown, triggered by global downturn and the airport attacks.

The country's economy relies heavily on the tourism industry.

Several international airlines have already suspended or reduced their services to Sri Lanka.

The economy, previously expected to grow at 4.5% this year, is now seen expanding by just 2.5-3% according to the Central Bank. The government's separate forecast is 3%.

Latest International Monetary Fund figures suggest growth in Sri Lanka of just 1% in the first half of 2001, against an original prediction of 3-4%.

See also:

18 Sep 01 | Europe
Minister to meet airline heads
18 Sep 01 | Business
More pain for US airlines
22 Aug 01 | Business
Sri Lanka growth slows after attacks
17 Aug 01 | Business
Sri Lanka ports in crisis
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