Air India Refuses To Accept Boeing Dreamliners Until Compensation Package Is Accepted; Pilots? Strike Enters 23rd Day, Loss Crosses $3.3b

on May 29 2012 8:53 AM
Boeing 787 Dreamliner Aircraft (INSIDE PHOTOS)
The inflight entertainment system is seen in Boeing's 787 Dreamliner aircraft during a media preview at an Air Canada hangar at Pearson Toronto International Airport in Toronto, March 2, 2012. Reuters

Air India has decided not to take the delivery of Boeing's 787 Dreamliner planes until both parties agree on the terms of compensation for a delay in delivery, India's Aviation Minister Ajit Singh said Tuesday.

Speaking to reporters in New Delhi, Singh said that the national carrier had worked out a compensation package, which would be taken forward to Boeing after due legal consultations.

We have to decide on a compensation mechanism before taking delivery of the Dreamliner and we have worked out a compensation package and are seeking a legal opinion on several steps on how to take it forward, Singh said.

However, he declined to elaborate on the terms or to disclose the compensation amount sought by Air India, citing a confidential clause. However, media reports said that the amount of compensation claimed by Air India could be near $1 billion.

The minister said that the national carrier would explore all options, including arbitration, if Boeing refused to agree on the compensation sought.

Air India had announced earlier that it would be taking delivery of the first of the 27 Dreamliner aircraft this month end, after a delay of three years from the original schedule.

Air India's board met in New Delhi Monday night and decided to stick to the compensation demand. The board meeting looked into a hoard of issues, including the options for handling the ongoing strike by its pilots and improving the economic viability of the debt-ridden state carrier.

The Aviation Minister formed a four-member panel Monday to examine the Air India's route profitability. The panel would review the status of airline's current routes and decide on criteria to withdraw from unprofitable routes.

Meanwhile, the strike by Air India pilots entered the 23rd day Tuesday. The strike has cost the national carrier an estimated Rs 3.30 billion so far. Current losses are more than Rs 300 crore. The losses are on accounts of ticket cancellations, unused labor and bulk of Boeing-777 fleet being grounded, a senior Air India official said.

Air India lost its market share considerably after the strike began as its schedules, both domestic and international, went into disarray, prompting heavy cancelations from its customers.

However, the airline officials have said that the international operations are stabilized and are running according to the contingency schedule. Air India is operating a fixed number of its international flights to long distances by clubbing various destinations.

 Bookings on our international flight have stabilized and we have placed maximum number of seats in the lowest price bracket... that has also helped bookings in the domestic sector as well in the current contingency plan, he said.

The airline is looking at other options like recruiting new pilots and wet-leasing to keep its flights schedules afloat. Air India announced Monday that if the crisis continued, it would prune a few more international and domestic schedules.

Air India pilots reported sick in huge numbers three weeks ago to protest against the management's decision to train pilots from the erstwhile Indian Airlines to fly B787 Dreamliners. The pilots allege that the move will give IA pilots undue advantage in career progression.

The pilots have continued their strike despite several requests from the management and the government to resume work. The Delhi High Court has declared the strike illegal and issued a contempt notice to the striking pilots. 

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