Cabinet to decide on Boeing 787 compensation offer (Lead)

June 6th, 2012 - 6:27 pm ICT by IANS  

New Delhi, June 6 (IANS) The Cabinet Committee on Economic Affairs (CCEA) is expected to take up American aircraft manufacturer Boeing’s offer of compensation for the delay in supply of 787 Dreamliner to Air India at its meeting Thursday, a senior official said.

“The CCEA might take up the issue tomorrow (Thursday) and will decide whether to accept the package offered by Boeing or not,” senior civil aviation ministry official told IANS here Wednesday.

The development comes as Civil Aviation Minister Ajit Singh Wednesday said the decision to induct the aircraft now rests with the CCEA.

“They (Boeing) have agreed to a compensation package for the delay in delivery of 787. The compensation solution has been accepted by the Air India board,” Ajit Singh told IANS here.

“It (package) will now go to the CCEA, which will decide whether to accept the package or not. We are expecting the CCEA to decide on the matter soon.”

According to Singh, if the CCEA gives its nod to the compensation package worked out between the airline and Boeing, Air India will receive three 787s within June itself.

Air India had earlier refused to take the delivery of the first 787 Dreamliner which was supposed to have been inducted on June 1, 2012, stating that it will take delivery after finalisation of the compensation for the delay.

Last week, the civil aviation ministry formally asked the US-based company in a letter on what kind of compensation package it was willing to offer the flag carrier.

The national carrier ordered 27 Boeing 787 aircraft in 2005-06, with the first aircraft scheduled to be delivered in 2008-09.

The delivery has been delayed by three years, causing the airline to lose several opportunities to deploy the aircraft on long haul international routes.

According to sources close to the development, any compensation given by Boeing will not come directly to the airline but will be deducted from the total cost of the aircraft.

“A deduction procedure has been discussed. Compensation will be deducted from the overall cost of the aircraft,” sources said.

The deduction process also assumes importance as the American Export Import Bank (ExIm) had given loan guarantees worth $3.3 billion to the carrier for buying 27 aircraft from Boeing.

If the deduction process comes through, it will mean substantial saving for the airline.

The airline has apparently come out with a mechanism to calculate compensation based on delay in delivery of individual aircraft.

“We do not seek a lump sum for all 27 aircraft. We now know that the total batch of 27 aircraft will be delayed in a varying manner, where first batch may come as soon as June while others may be stuck.”

Meanwhile, airline officials have said that the first batch of the aircraft would be initially flown on domestic routes for six-eight weeks to enable faster training of pilots and crew.

The airline has proposed that the first long haul flight of 787 aircraft will be operated on Mumbai-London route in August 2012, followed by an Australia-based operation which will commence soon later.

The 787 has already been certified by Federal Aviation Administration (FAA) of the US and the first of the three aircraft is said to be ready for delivery.

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