After deferring delivery of 787s last week pending a compensation agreement, Air India’s board and Boeing have come to an agreement pending the approval of the Cabinet Committee of Economic Affairs (CCEA).
It is hoped that the CCEA will make a decision to approve the package soon, although it could take over a week for the CCEA to make its decision. A rejection of the CCEA would be devastating, delaying the delivery even more until a new agreement can be agreed to. Boeing also would be under no obligation to come to a more generous agreement, so a rejection could result in the cancellation of the order.
The details of the compensation plan are not clear. The only detail which the Ministry of Civil Aviation has been willing to share is that the compensation will be depending on the day of individual aircraft, instead of being paid out in a lump sum. This means that Boeing would be penalized for future delays as well, enticing Boeing to expedite Air India’s deliveries and ensure no further delays occur. The compensation will be deducted from the cost of the aircraft.
Air India has financing lined up through US Export Import Bank loan guarantees and Indian Government guarantees. The airline plans to fund the expansion through sale-leaseback transactions. Air India has clarified that financial difficulties were in no way responsible for the delay in delivery.
If this compensation agreement gets approved, Air India will likely take delivery of 3 aircraft this month. Boeing will likely deliver 8 787s this month, making it the month with most deliveries so far.
After taking delivery, Air India will initially fly the aircraft on domestic routes for crew familiarization and technical support for any issues with the new aircraft. After that, the aircraft will fly internationally to Europe for a few months, for continued technical support. European routes will also have the advantage of being established stations, who can more easily cope with issues that come up with the aircraft introduction.
Air India is expecting to launch service from Delhi to Australia (via Bangalore) from September.