The national carriers, Air-India and Indian Airlines, have dismissed the stiff condition set by their international insurers to raise the cap for third party liabilities towards hijack, war and civil riots to $1 billion per occurrence.
Sources said the insurers have demanded a fresh surcharge of $ 3.50-3.75 per passenger in addition to the recently imposed $1.25 surcharge per passenger to relax the cap, currently fixed at $ 50 million. The surcharges, in addition to the 0.05 per cent of fleet value being forked out by the airlines now, could cost them annually about Rs 150 crore per million passengers.
The amounts would have to be paid by the airlines to the insurance companies upfront even if their leased aircraft remained unharmed during the year.
Also Read
Top government officials told Business Standard that the development in the international market was conveyed to them late on Monday night. Over the next couple of days, the caps on third party liability are likely to return to their original level of $3 billion, they added.
The government had provided letters of comfort to both the state-owned airlines for covering third party risks for the 15 days on Friday. The airlines are therefore, only likely to ask the government for an extension of the 15-day guarantee if the international insurance companies do not relax the conditions further.
The airlines could then repay the government by imposing a surcharge per ticket if a mishap indeed occurred. The government would be required to honour the guarantee offered to the leasing companies and the financiers for any damages to their airliners.