NU Online News Service, Sept. 14, 3:00 p.m.EDT

The airline industry insurers market will probably not make aprofit for the third year in a row despite an average 17 percentincrease in prices between January and July this year, Aonsaid.

The Chicago-based insurance broker in its "Airline InsuranceMarket Indicators 2009/10" report said airlines with a hardeningmarket, increased claims and a drop in passenger volume areexperiencing a very difficult year.

Magnus Allan, Aon Global U.K. Aviation & Aerospace analyst,said in a statement, "While some of the industry data is startingto look more positive, given the well-documented decline in thenumber of business travelers, passenger number forecasts could beeven more gloomy by the end of the year once more of the industry'smajor players have placed their 2009/10 insurance programs.

"The tension between the insurance markets needing to increasepremiums and an industry that is suffering from the effects of theglobal economic downturn continues," he concluded.

In part, the tension is magnified by the high value of loss theindustry has experienced this year, making it the most expensivefirst-six-month loss since 1995.

Total claims are up 15 percent above the long-term average for afull year, said the report, with 409 aviation-related fatalities sofar this year, compared to 298 for the same period last year.

However, there have been only 20 losses (incidents with anincurred hull and liability loss value of $1 million or more)compared to the long-term average of 42.

Further increases in premium pricing, Aon noted, could be heldin check by the "level of latent capacity" in the airline insurancemarket and increased competition as other insurers step in to takeadvantage of rising prices.

"There's no getting around it, 2009 has been a terrible year sofar for the aviation industry," the report said.

Despite the positive economic news of recovery, the report said"it will be a long time before the industry gets back into positive[earnings] territory."

For the airlines, passenger numbers continue to drop while theyface rising fuel prices spurred on by the improving economy, Aonnoted.

The result could be a number of major mergers pushed bybankruptcies and government intervention, the report said.

Aon said average fleet values are expected to rise 1 percent,but passenger numbers are set to decline by 9 percent.

The full 48-page report is available at Aon's Aviation InsightWeb page.