Air India saves costs by taking insurance cover for merged entity

Air India, now under the Tata management, has managed to cut its insurance cost for the ongoing fiscal year by paying a premium of $30 million for the fleets of Air India and Air India Express, with a sum assured of $12 billion.

Last year, the airline had paid a similar premium but for a sum assured of $10 billion for the Air India fleet, a source privy to the development said.

The insurance cover has been provided by a consortium of Indian insurance companies including Tata AIG General Insurance. The Indian companies have reinsured the airline with foreign insurers including AIG Insurance which is an important player in the aviation insurance market.

 

When contacted, the Tata group did not comment.

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“In this year’s insurance transaction, the airline has received a good deal as the number of aircraft has increased to 200, but the premium paid is the same as last year,” said the source.

Once the merger of Vistara with Air India is completed, it will be a large insurance transaction from India, the source said. Air India has not seen a rise in its insurance premium for the last two years, the source said.

Besides, the source said the Air India group has ordered 470 planes -- 250 from Airbus and 220 from Boeing -- making it a potential large customer for aviation insurance.

In July last year, Air Asia India had received regulatory approvals to operate the airline’s flights under the ‘Air India Express’ branding prior to the subsequent legal merger between the two airlines to create a single low-cost subsidiary.

The Tata group had acquired Air India and its low cost subsidiary Air India Express in January 2022. Later the group decided to merge its own cost carrier, Air Asia India with Air India Express.

The source said the merger of the airlines will start showing savings as the merged entities consolidate their vendors.

After the Tata group acquired the airline from the Indian government, it has taken several steps to turnaround the airline including merger of Air Asia India and Air India Express, and has initiated the merger of Vistara, a joint venture with Singapore Airlines and Tatas, with Air India. The airline has also given orders to modernise its fleet and rationalisation of staff.