NEW DELHI--Boeing Co. (BA) will have to compensate Air India
Ltd. for losses incurred by the state-run carrier due to the
grounding of half a dozen 787 Dreamliner jets, India's deputy civil
aviation minister, K. C. Venugopal, said in parliament
Thursday.
The minister said Air India has already begun the process of
seeking compensation from the U.S. plane maker.
He didn't disclose the amount of compensation that will be
sought from Boeing. Mr. Venugopal also didn't specify the losses
incurred by Air India due to grounding of its Dreamliner fleet.
Air India--one of Boeing's initial customers for the
Dreamliner--had suspended operations on its entire fleet of six
787s in the middle of January after being asked to do so by India's
director general of civil aviation.
The carrier was among eight Dreamliner operators worldwide that
had to ground a total of 50 787 jets after battery malfunctions on
two of the planes operated by All Nippon Airways Co. (9202.TO) and
Japan Airlines Co. (9201.TO) led to safety concerns.
On Saturday, Ethiopian Airlines became the first operator to
restart commercial flights since Jan. 16 when the U.S. Federal
Aviation Administration grounded the jet, a decision quickly
matched by regulators in other countries including India.
On Sunday, Dreamliner launch customer All Nippon Airways began
test flights on a 787 in preparation to resume passenger
flights.
Earlier this week, an executive at Air India said the airline
expects to resume passenger flights on its Dreamliner planes by the
end of May after refitting new battery systems on the twin-aisle
jets.
The FAA had approved the new battery-system design on April 19,
permitting planes to begin modifying their jets.
Mr. Venugopal said the agreement between Air India and Boeing,
in line with the standard warranty terms offered by aircraft
manufacturers, has a clause that says the manufacturer won't be
liable for any loss of revenue or profit of the airline due to any
fault in the aircraft.
"However, at the time of signing the purchase agreement, the
situation of grounding of the entire fleet was not foreseen or
taken into account," the minister said in response to a query by a
lawmaker in the upper house of parliament.
"Therefore, this situation needs to be dealt [with] separately
outside the purview of the purchase agreement," he said.
In January 2006, Air India ordered a total of 27 Dreamliner
planes and six of them have been delivered, though several years
behind schedule.
Mr. Venugopal said also Boeing has already agreed to compensate
Air India for delay in delivery of the remaining Dreamliners. He
didn't disclose the size of the damages, citing confidentiality
clauses in the purchase agreement between Air India and Boeing.
The jetliners, which Boeing says are more fuel-efficient than
similarly sized jets, are crucial in Air India's plans to turn
around its operations by cutting costs and starting services to
more foreign destinations.
Write to Santanu Choudhury at santanu.choudhury@dowjones.com
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