In a report to senior CAAC officials, Chen Xiaoning, director of the research institute under the administration, said the potential impact of the terrorist attacks may be more serious than the countable losses.

In the four days after the attacks, when the United States shut its airspace to all air carriers, three Chinese airlines operating China-US flights lost 33.4 million yuan (US$4 million) in passenger business. In the cargo transportation business, they lost 40 million yuan (US$4.8 million).

The three airlines are Beijing-based Air China, Shanghai-based China Eastern Airlines and Guangzhou-based China Southern Airlines.

All three have large amounts of debt in Japanese yen, and the sharp shrinking of US dollars after September 11 made them loss 220 million yuan (US$26 million) in money exchanges, the report said.

But the international insurance industry was hardest hit by the terrorist attacks. Most of them transferred much of their cost burdens to airlines by raising insurance rates dramatically.

Chinese airlines have paid more than 830 million yuan (US$100 million) in increased passenger insurance rates, as well as 187 million yuan (US$22 million yuan) extra to insure their aircraft.

At the same time, the report said, General Electrics claimed US$100 million in extra charges for the 51 planes the company leased to Chinese airlines.

Security charges also surged after the attacks, the report said.

Each plane now has to pay US$50,000 for an advanced cockpit security system.

China now has a 527 planes, and a security system for each one brings security expenses to at least US$25 million.

Chen said in the report that the attacks have put many large international airlines on the verge of collapse, casting a negative affect on China's aviation industry for the long term.

Chen's research will help senior CAAC officials take the necessary steps to solve the problems.

Bao Peide, CAAC vice-minister, said his administration would keep a close eye on the development of the world aviation industry.

He also said he is confident that the Chinese aviation industry will develop on the right track as long as China's economy maintain its strength.

Bao's optimism was supported by the Chinese airlines' domestic performances after the US terrorist attacks.

Deutsche Bank analysts said China Eastern Airlines and China Southern Airlines, both listed in the New York and Hong Kong stock markets, saw a 6.9 per cent and 12.6 per cent passenger increase respectively in September compared with the same month last year.

Their cargo transportation also increased by 7.4 per cent and 12.6 per cent respectively.

(China Daily November 21, 2001)