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Rediff.com  » Business » Govt may approve Boeing compensation package

Govt may approve Boeing compensation package

June 08, 2012 18:26 IST

Air IndiaExpecting Air India to induct the first three Boeing 787 Dreamliner aircraft this month, government is likely to approve next week a compensation package from the US aircraft manufacturer for an over three- year delay in delivery of the planes.

Air India Board has sent a proposal to the government on the compensation package after talking to Boeing. "It will be taken up by the CCEA (Cabinet Committee on Economic Affairs) whenever the next meeting is held," Civil Aviation Minister Ajit Singh told PTI in New Delhi.

A meeting of the CCEA is likely to be held next week.

The minister said while the first three Dreamliners were expected to be delivered this month, five-six more of these planes would be delivered over the "next few months", taking the total to eight or nine this year.

Last month, Singh had made it clear that the aircraft could be delivered only after the compensation package was finalised.

While no official figure is forthcoming about the value of the compensation on grounds of confidentiality of negotiations, former AI CMD Arvind Jadhav had told a parliamentary panel in March 2010 that a claim of $710 million had been made.

Following this, several rounds of negotiations have been held between Boeing and Air India, including in the last two weeks, as official sources said this amount could vary now.

The compensation package would not mean Boeing writing a cheque for AI, but the most likely process would be to adjust the price with the delivery of each aircraft.

As of last year, the list price of a B-787 was about $194 million.

Air India's Board had in late May finalised the issue of compensation, including the amount to be claimed and how.

It had then forwarded its decision to the government for approval.

One of the three Dreamliner jets to be handed over to Air India now would be the first aircraft from Boeing's new North Charleston plant. This plane, which was rolled out on April 27 and flew for the first time on May 23, is being painted in Fort Worth in Texas. The others would be from its Everett plant.

The national carrier had placed orders to buy 27 B-787s in 2005 and as per the original schedule, Boeing was to commence delivery from September 2008.

Air India has already invited proposals from banks and financial institutions to raise short-term loans up to $500 million to take delivery of first few Dreamliners by December this year.

The only other Indian carrier to have ordered Dreamliner is Jet Airways which wants to acquire ten of them and their deliveries are to begin in another four years.

Boeing has received 896 orders for this aircraft and has so far delivered about 11 of them, the first one going to All Nippon Airways of Japan.

Delivery was delayed due to various factors, including delays relating to supply of outsourced parts and labour trouble in Boeing.

The B-787 long-haul aircraft, made of composite materials like carbon fibre, is portrayed as a fuel-efficient plane that would help slash flying costs significantly due to its lighter weight and capacity of non-stop flying.

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