Cabinet approves revision of the compensation on SESF Operations with Boeing 747-400 aircraft

The Cabinet Committee on Economic Affairs chaired by Prime Minister Shri Narendra Modi has given its approval to enhance the expenditure for "Special Extra Section Flights" (SESF) operations from Rs.336.24 crore plus applicable taxes to Rs.534.38 crore plus applicable taxes for 2016-17 with built-in annual escalation of 10% to compensate the cost of living index and exchange fluctuation for the maintenance of B747-400 aircraft.

In view of the serious financial and liquidity position to the Company, the enhancement would help to ease some of its financial burden.

Background:

Air India (Al) operates SESF with B747-400 aircraft for the President, the Vice President and the Prime Minister of India. The costs on account of these flights are reimbursed to Al by the respective Ministries. The Cabinet Committee on Economic Affairs (CCEA) in its meeting held in October, 2011 had approved an annual expenditure of Rs.336.24 crore plus applicable taxes for meeting the fixed costs relating to the expenditure incurred by Al on B747-400 aircraft.

 

This fixed cost of maintenance was allocated amongst the three respective Ministries. These costs have been constant since FY 2011-12. Over the past five years there has been a substantial increase in the expenditure incurred by Al on maintenance of these aircraft on account of the increase in the cost of living index, depreciation of the Rupee against the US$ and increase in the material cost. It is therefore necessary to review the estimates / reimbursements provided to Al since the year, 2011-12 as the cost base has not been indexed to inflation. Since, Al is suffering financial losses, the airline cannot afford to provide any services below its cost.

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