Oriental Insurance Company has bagged the domestic aviation industry's first-ever contract to cover losses owing to fog for national flag carrier Air-India.

Oriental Insurance will cover fog-related losses of the airline up to Rs 1.5 crore (Rs 15 million) till February 2007.

Industry analysts pointed out losses for domestic airlines owing to fog-related flight disruptions was estimated at Rs 150 crore to Rs 200 crore (Rs 1.5 billion to Rs 2 billion).

Fog, which creates poor visibility for a pilot, affects maximum in the month of January and results in 18-20 loss every year.

"Following the suite of Air-India, several airlines are in talks with insurers for designing customised covers for fog-hit months. However, airlines are bit hesitant to high premium and conditions put forth by insurance companies," an airline executive said.

Sources said the insurance cover for Air-India will be effective from 27 December and first three fog days will not be covered under the contract.

"Aircraft landing visibility level for ascertaining fog is kept at 200 metres. The fog day will decided upon the reading of India Meteorological Department," they added.

Air-India Executive Director S Venkat said, "We are planning to increase our cover further from Rs 1.5 crore based on this first experience." However, he refused to divulge details on the premium paid adding, "we have secured this contract at competitive rates."

Air-India had received several bids from state-owned and private insurance companies. Oriental Insurance outbid all these bidders to bag the contract.

Oriental Insurance's gross direct premium income in India during the year 2005-06 was Rs 3527.11 crore (Rs 35.27 billion) and the premium income outside India was Rs 82.66 crore (Rs 826 million).

Air-India also plans to float another tender for insurance cover for fog-related risk in foreign countries such as the UK and US.

"This is part of a risk-mitigation process. We have also devised a fog-contingency plan to help passengers and minimise possible delays," Venkat said.

In the domestic scenario, the loss for cancelling an Airbus A320 aircraft, that is flying one hour, is estimated at Rs 75,000 to Rs 80,000.

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