BBC News Online: World: South Asia

Airlines suspend Sri Lanka flights

Insurance premiums soared after last month's airport attack

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.

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%.