The Hong Kong Special Administrative Region government will provide billions of U.S. dollars in indemnity and guarantees for Hong Kong-based airlines whose war-coverage insurance policies expire Tuesday.

The Legislative Council and its Finance Committee on Monday approved the government's proposal to provide third-party indemnities out of war, or terrorism or other perils, Financial Secretary Antony Leung told the media.

The government originally proposed a six-month insurance backing for airlines. The LegCo agreed to only one month's backing, to be extended if necessary pending new contracts with insurers.

Citing an independence of Hong Kong on air traffic with the outside world, Leung said the main aim of the bailout "is to ensure the normal operation of our air services and also to maintain Hong Kong as an aviation hub."

The bailout will help two Hong Kong-based passenger carriers, Cathay Pacific Airways and Hong Kong Dragon Airlines Ltd (Dragonair), and one cargo carrier, AHK Air Hong Kong continue flying.

The government will pay up to 1.95 billion U.S. dollars in damages to an airline for losses caused by aircraft brought down by attackers, with up to 1.25 billion U.S. dollars of coverage for each incident for the Hong Kong Airport Authority and up to one billion U.S. dollars for each incident to airport service providers.

Also on Monday, Cathay Pacific Airway, Asia's fourth largest airline by capacity, announced that it has reached an agreement with a private insurance company enabling it to continue operations.

Dragon Airlines also said Monday night that it has reached agreement with a private insurer to ensure normal operations.

(Xinhua 09/25/2001)