Air India unhappy with Boeing's $500-mn compensation offer

New Delhi: US commercial aircraft maker Boeing is offering $500 million as compensation to national carrier Air India for delay in deliveries of the futuristic B787 Dreamliner aircraft. Though a jump of more than three times over its earlier offering of $145 million, Indian civil aviation ministry officials say the amount is grossly inadequate.

Boeing 787 Dreamliner. Image: BoeingBoeing and Air India have locked horns over a long period of time over adequate compensation for delayed deliveries of the futuristic 787 Dreamliner. Senior ministry officials are quoted as saying they are trying to ensure better compensation as the delay has caused the airline both opportunity and operational losses amounting to over $1 billion.

Earlier, in January 2009, Air India sought $710 million from Boeing as compensation for the delays, which figure was raised to $840 million in August last year.

Air India ordered 27 Dreamliner jets in 2006, which were to be delivered by September 2008. Deliveries will commence only in the last quarter of this year.

The airline is basing its compensation claims on the grounds of loss of opportunities, business and market share, leasing of jets at high cost, additional interest burden on pre-delivery payments made for the planes and inability to use more fuel-efficient aircraft.

Apparently Boeing offered compensation worth $145 million in liquidated damages, which were a part of the contract and ought not to be included in the compensation value. Liquidated damages because of delay are usually 0.5% of the total contract value and are to be paid on a weekly or monthly basis for a specified time as mentioned in the contract.