Air India seeks higher compensation from Boeing

HYDERABAD, India Wed Mar 14, 2012 8:55pm IST

Journalists look at a new Boeing 737-800 aircraft in the livery of Air India Express at Mumbai airport May 24, 2007. REUTERS/Punit Paranjpe/Files

Journalists look at a new Boeing 737-800 aircraft in the livery of Air India Express at Mumbai airport May 24, 2007.

Credit: Reuters/Punit Paranjpe/Files

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HYDERABAD, India (Reuters) - Air India is negotiating for more compensation from Boeing Co (BA.N) for delayed aircraft delivery, a senior government official said, after the planemaker agreed to pay the cash-strapped airline more than $500 million.

"Two weeks back they (Boeing) agreed to pay a little over $500 million. We are asking for more, we are talking to them," joint secretary at the ministry of civil aviation, Prashant Sukul, said on Wednesday.

State-owned Air India was seeking nearly $1 billion from Boeing to compensate for the delays, a source told Reuters last month.

Speaking at a JP Morgan aviation conference later on Wednesday, Boeing Commercial Airplanes Chief Executive Officer Jim Albaugh disputed the claim that Boeing had agreed to the payment.

"We don't comment on deals that we've done. But I can tell you we're not writing anybody a check for $500 million," Albaugh said.

Deliveries on the national carrier's 2005 order for as many as 50 long-range Boeing jets worth about $6 billion have been delayed by more than three years, disturbing Air India's plans and schedules.

Air India expects to take delivery of seven Boeing Dreamliners in the next fiscal year that starts in April, Chairman Rohit Nandan said on Wednesday.

The state carrier, burdened with a $4 billion debt, is banking on government support to continue operations. It owes about $500 million to oil marketing companies and about $240 million to airports.

Rival Kingfisher Airlines (KING.NS) is also struggling.

The loss-making private carrier has failed to stick to its agreed recovery plan, the head of India's aviation regulator said on Wednesday, adding that the current situation at the carrier cannot be allowed to continue for long.

India's airlines are likely to lose up to $3 billion in the fiscal year ending March as the industry's total debt swells to $20 billion. Five of India's top six airlines are in the red.

(Writing by Swati Pandey; additional reporting by Kyle Peterson in Chicago; editing by Malini Menon and Matthew Lewis)

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