Air India Boosts Claim for Boeing Compensation on 787 Delay to $1 Billion
Air India Boosts Demand for Boeing 787
Adeel Halim/Bloomberg
An Air India Ltd. aircraft awaits its turn to take off at Mumbai International Airport in Mumbai.
An Air India Ltd. aircraft awaits its turn to take off at Mumbai International Airport in Mumbai. Photographer: Adeel Halim/Bloomberg
Air India Ltd. (AIND) increased its demands for compensation from Boeing Co. (BA) to about $1 billion following the planemaker’s delays in delivering new 787 Dreamliners, an India civil-aviation ministry official said in New Delhi.
The talks won’t affect deliveries, and there’s room to negotiate until all 27 Dreamliners on order have been handed over to the state-owned airline, said the official, who asked not to be identified citing government policy. Boeing, based in Chicago, declined to comment.
Air India had said in August 2010 that it would seek $840 million from Boeing, whose new 787 hadn’t yet entered service at that point. The carrier’s order would be valued at about $5.7 billion, before traditional discounts off the plane’s average list price of $211 million. The Dreamliner was 3-1/2 years late when it began passenger service in November, after seven delays related to new materials and manufacturing processes used.
“I might believe $300 million if all 27 planes were all very late, but $1 billion seems pretty dreamy” for a compensation payment, said Joe Campbell, an analyst with Barclays Capital in New York.
Boeing has said it’s still in negotiations with customers over the delays, which forced some airlines to revise route plans or order other models to fill the delivery gap.
Boeing repeated in a Feb. 9 filing that it plans to build 10 Dreamliners a month by the end of 2013 as it works off a backlog of more than 800 orders for the model. The company said it will reach a delivery rate of 10 a month by early 2014.
“The scale and duration of the 787 program is such that relatively minor changes in assumptions or variables could have a material effect on our reported results in any period if the program is determined to have a reach-forward loss,” Boeing said. The model has a low single-digit profit margin, it said.
Air India’s compensation demand includes $145 million in the form of liquidated damages as part of the sale agreement, the person said. The airline will probably receive its first 787 this month, an Air India official said Feb. 3.
To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net
To contact the editors responsible for this story: Neil Denslow at ndenslow@bloomberg.net; Ed Dufner at edufner@bloomberg.net
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