Mr. Wignes made comments in regard to the Federal Aviation Administration's War Risk Insurance Program. The program has been available to U.S. carriers flying into war zones since the 1950s, according to the Department of Transportation, which administers it, but has been extended to domestic carriers since January 2003.

Coverage for domestic flights was recently extended to the domestic industry until Dec. 31 by the acting U.S. Secretary of Transportation. But the industry is concerned because since Aug. 31, the agency has been operating on discretionary authority to extend the coverage until Dec. 31, according to officials at the Air Transport Association and the Federal Aviation Administration.

A provision in the DOT-Treasury-House appropriations bill for fiscal year 2007 that has been passed by the House and reported out by a Senate Committee would extend the provision until Aug. 31, 2007, with discretionary authority to extend it until Dec. 31, 2007.

However, Congress is unlikely to act on that appropriations bill before a lame duck session after the November election.

The provision was contained in the Homeland Security Act of 2002 and extended for one-year periods since then, according to an FAA public relations official and an agency insurance examiner.

The FAA officials also say that the War Risk Act, first passed by Congress in the 1950s, gives it some authority to extend more limited and far more expensive coverage under that law, which expires March 31, 2008.

"The Federal Aviation Administration has the latitude to extend until 2008, but not the obligation," Mr. Wignes noted.

"Our concern is that absent congressional intervention to extend the program beyond March 31, 2008, the FAA may decide not to extend it if it comes under pressure from the [European Union] or free-market economists, who say the government should not be involved in areas where the private sector has the ability to compete," he said.

"The private market is a flawed solution because there is not enough capacity for a viable market," he warned.

"Because of the availability of this program, new money has come into the aviation insurance industry, therefore reducing the overall cost of insurance to U.S. airlines--even in the face of deteriorating balance sheets because of other problems," Mr. Wignes said.

"In other words, despite rising costs for labor and fuel, the cost of insurance for domestic aviation has declined despite Sept.11," he added.

Mr. Wignes explained that before Sept. 11, premiums for the world commercial airline market totaled $1 billion annually. After Sept. 11, premiums quadrupled, to $4 billion--but that level has now declined to about $2 billion, he added.

The reason for the decline, according to Mr. Wignes, is that insurance industry interest in airline coverage pools is growing.

There are two fundamental criticisms of the program, according to Mr. Wignes.

The European Union believes that extending the war risk program to domestic airlines is an implied subsidy, "but the observation advanced by U.S. congressmen that only U.S. carriers have been subject to this risk is an accurate rebuttal," said Mr. Wignes.

"Another criticism is that some insurers want to get back into the program because there are windfall profits to be made," Mr. Wignes added. That was implied by the statement of DOT officials that, in the long run, the agency and the Bush administration "would prefer that the private sector provide reasonably-priced terrorism risk insurance to domestic airlines sometime in the future."

In reply, Mr. Wignes said that "if you were to make the bet that the next terrorist attack won't involve an airline, then there are windfall profits to be made. The U.S. government has made more than $100 million in profits since the program was launched in 2003, so there are some insurers who would like to get back into the business."

He added that "some free-market economists say that no matter what the price, you should buy it in the private sector."

However, according to Mr. Wignes, the downside is there is a "huge risk in the collectibility and enforceability of such contracts. There are legal questions about this."

He explained that on Sept. 11, "the insurance companies we worked with were providing this coverage as an industry."

"Had there been six losses, instead of four, it could have bankrupted the insurers in questions, no matter what the contracts said," he explained.

"Everyone forgets that every insurance policy has a credit risk element to it, so the position you hear from those of us who advocate the program--and I am one of the more vocal spokesmen on behalf of our clients--is that there is no real alternative to the FAA program, and the FAA program has to be renewed for the foreseeable future," he said.

Nuclear, biological, chemical and radiation risk is another issue, Mr. Wignes noted. "It is not an issue while the FAA program is in effect," he said. "But if private market resumes its role here, there will be limitations on risk from weapons of mass destruction."

Already, he said, that is happening with foreign carriers that are buying foreign insurance.

"They are not eligible for the FAA program, and that is why the EU is claiming that the FAA program is inherently an unfair advantage," he added.