Air-India and Indian Airlines will seek third party cover of $1 billion and $500 million from their insurers from November 1. The state-owned carriers would have to pay a per ticket surcharge $1.85 and $1.15, respectively for the cover.
The total per ticket surcharge would now work out to be $3.10 for Air-India and $2.40 for Indian Airlines. The insurers have already charged per passenger insurance surcharges of $1.25 and 0.05 per cent of fleet value for guaranteeing third party liabilities of $50 million.
To offset these payments, Air-India is presently levying a per passenger surcharge of $3 for ex-India travel and $5 otherwise. Indian Airlines is charging Rs 100 for domestic travel and $2 for foreign tickets.
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Air-India carries about 3 million passengers a year and its additional insurance costs on account of the fresh surcharge would work out to be $5.35 million for the additional third party cover of $1,450 million. Indian Airlines would have to cough up $ 9.20 million (8 million passengers a year) to its insurers for the cover of $450 million.
The development follows the government's refusal to extend the letter of comfort that it had provided to the airlines for third party cover of $1,450 million and $450 million beyond October 31. The guarantee was originally provided for 15 days on September 28 and was subsequently extended for 15 more days. The ministry of civil aviation had earlier, written to the Cabinet for a 90 day extension of the government guarantee.
The carriers had been negotiating with their insurers, who had earlier demanded a per passenger insurance surcharge of $3.50-$3.75 for relaxing the present third party liabilities caps to $1 billion from $50 million.
Air-India may still have to seek a further extension of government guarantee for $500 million or negotiate further with its insurers since originally its third party liability had been at $1.5 billion.
The airlines were asked by the Centre to pay 0.25 per cent on an annualised basis for the government guarantee that the Centre would cover third-party claims for them. IA would however, have to pay the government Rs 40 lakh for the guarantee for 30 days. A-I would have to pay approximately Rs 1.6 crore to the Centre.