Neck-deep in loss, AI spends $6 m to insure 6 grounded planes

National carrier Air India, which is sitting on a huge debt pile and surviving on the Rs 30,000- crore government bailout, is allegedly getting even those aircraft, which have not been in operations for some years now, insured at a cost of USD 6 million in a year.

The state-run airline's recognised pilots union, the Indian Commercial Pilots Association (ICPA), has sought an independent probe into these allegations and fix the accountability on individuals responsible for this.

"Six Boeing 737-200 Fs, which have been out of service for more than three years, are still being insured at USD 1 million each per annum or USD 6 million, for more than the past three years. We demand an immediate, time-bound investigation by an external agency to look into this huge financial irregularity," ICPA General Secretary Shailender Singh said in a letter to Air India Chairman Rohit Nandan.

The letter is also addressed to Aviation Minister Ashok Gajapathy Raju and the Chief Vigilance Commissioner.

The Air India spokesperson did not respond to calls.

The airline had renewed its insurance on October 1 for nearly USD 29 million to cover its 132 aircraft (including the 17 of AI Express and 8 of Alliance Air,) which was close to 18 per cent higher than it what it paid last year, USD 23 million. Airline insurance premia had gone up this year after a string of tragedies across the globe.

Alleging that even as recent as on October 1, the insurance cover for four of these aircraft was renewed for another year at USD 50,000 each, the ICPA said, "We are also alarmed at the sharp 95 per cent drop in the insured sum of these aircraft, which till September 30 were insured for USD 10,00,000 and now only for USD 50,000."

These aircraft were converted into freighters for cargo operations at a considerable expense at a time when they had almost completed their life span, ICPA said
The contract for their use was executed with logistics firm Gati in May 2007, which was discontinued in March 2009, due to certain disputes, which the union claims to have led to an arbitration which the Air India lost.

The arbitration tribunal had recently ordered Air India to pay Rs 26.82 crore to the private company.

"We also demand a complete and independent probe into this contract and a diligence audit into how the case was handled by the management. What is baffling is that the management is maintaining these aircraft in its fleet and paying hefty insurance premium for no use," the letter alleged.

"Prima facie there is a loss of crores of rupees on account of unwarranted insurance outgo alone, in addition to the awarded claim of Rs 26.82 crore ordered by the arbitration tribunal in favour of Gati. To this has to be added the cost of conversion of these aircraft from passenger to cargo configuration," the ICPA letter said.

The union said that these losses are being incurred at a time when salaries and allowances are being cut unilaterally and when the management claims that it is an everyday fight for them to pay full salaries to the staff and meet other day-to-day operating expenses.