Government has asked international companies to commit a maximum of $3 million to underwrite the Bermuda Government's airline revenue guarantees, has learned.

And airlines last year received $529,000 out of a possible $820,000 in airline guarantees, largely to cover passenger shortfalls on US Airways' Bermuda to Fort Lauderdale flight, according to documents obtained by .

This year, Government is seeking a maximum of $3 million, including a $1.5 million guarantee, for the recently launched American Airlines flight to Miami.

Tourism Minister Ewart Brown admitted yesterday that the response had not been "what I would have hoped". But he said his Ministry was still working on the initiative.

He termed the effort an example of "good corporate citizenship" rather than a form of indirect taxation on international companies. "That's like comparing the opening up of an abscess to major medical surgery," he said. "This is just the same old partnership we're always talking about."

Airline revenue guarantees, which Dr. Brown mentioned in his tourism outlook for 2005 in January, are financial guarantees given to an airline when they are considering the addition of a new flight to Bermuda. The airline, for example, will inform the Bermuda Government what percentage of seats it needs to fill to make such a flight profitable.

The Bermuda Government then guarantees that if that percentage target is not met, Government will make up the financial shortfall to the airline.

After the profound impact of the World Trade Center attacks on the airline industry, such guarantees ? which are usually in place for a maximum of six months ? are becoming more and more common in the airline industry.

The funds must be kept in escrow, meaning that they cannot be used for any other purpose. By persuading the international companies to underwrite the guarantees, Tourism could use the $3 million slated for this year for other promotional activities, the documents said.

The hotel industry was also asked to contribute towards underwriting the airline revenue guarantees, and last week Bermuda Alliance for Tourism chairman Mike Winfield said the benefits were obvious.

The tourism sector was asked to participate in the guarantee for the first time in 2004, he said. "It really represents a paradigm shift in the way Bermuda and other jurisdictions are doing business."

Echoing the memo sent to the business community, he said the challenges facing the airline industry today necessitate "some form of guarantee".

However he declined to go into the specifics of the industry's agreement with Government.

"It was a question of the Ministry of Transport coming to us through the BAT and saying look, this is the new thing. You say you need new gateways, but the competition necessitates this. Would you consider making this happen?"

The benefits, Mr. Winfield added, were obvious ? more flights, more gateways, more visitors to the Island, more revenue for the tourism industry. "It's just a matter of the private sector getting involved."

The memo sent to the business community from Government, entitled "Bermuda, The Gateway to the World: A Working Partnership between the Bermuda Government and the Business Community", said Government and the private sector set up a fund of $820,000 for airline guarantees in 2004. Of that total, $529,000 was called upon ? mostly to cover the failed US Airways Fort Lauderdale flight, but also to United to cover a shortfall in the Chicago flight.

This year, the memo notes, the American Airlines Miami flight has been added ? a flight which "could lead to a potential maximum exposure of $1,500,000". However, the memo adds: "In order to secure this gateway, Bermuda had to make some concessions. The guarantee with American (Airlines) could produce a $1.5 million loss in the worst-case scenario, making it the largest guarantee signed to date."

Dr. Brown said yesterday that numbers on the Miami flight ? which began service to Bermuda in the beginning of March ? indicate so far that the shortfall may not be called upon.

His Ministry is continuing to pursue the initiative, he said.

Other airline guarantees include $200,00 for the United Airlines' flight from Bermuda to Chicago, which is now in its second year.

In addition, the Tourism Ministry is pursuing a new European gateway out of either Frankfurt, Milan or Paris, and the memo said this could result in an exposure of $300,000.

Government is not offering revenue guarantees for Northwest Airlines' new Detroit flight, but is waiving landing fees and giving marketing support from the Government to promote it as a new gateway to Bermuda. The service starts this month.

The total for the guarantees comes to $2 million and it was not clear what the additional $1 million would be for. However, Government said it could add European charter flights.