Reduced flights, ticket cancellations and fare adjustments continue to deepen losses for Air India over a month after one of its Boeing 787 Dreamliners crashed shortly after takeoff from the Ahmedabad airport.
The crash, which killed at least 260 people on 12 June, and the subsequent losses are a blow to owner Tata Group's ambitious plans to restore the airline’s reputation and revamp its fleet.
All but one of the 242 people onboard flight AI171 to London Gatwick were killed in the crash, including 53 British citizens. The plane crashed into a hostel complex at the Byramjee Jeejeebhoy Medical College, killing several students and residents on the ground. Only one passenger, a British man seated in 11A, miraculously survived.
A preliminary investigation report released last week revealed the aircraft’s fuel switches almost simultaneously flipped from “run” position to “cutoff” three seconds after takeoff.
It claimed that one pilot was heard on the cockpit voice recorder asking the other why he had cut off the fuel. "The other pilot responded that he did not do so," the report added.
At the crash site, both fuel switches were found in the “run” position and the report noted that there had been indications of the engines relighting before the low-altitude crash.
The crash is challenge to CEO Campbell Wilson’s push to revive Air India as a “world-class airline”. It’s set to become the most expensive aviation insurance claim in India’s history, with about £353m in total liability, according to Bloomberg.
The figure includes the full hull value of the aircraft, compensation for families of the victims under international aviation law, and payouts for third-party property damage and loss of life on the ground.
While the airline’s losses are expected to be covered under “all-risk” aviation insurance, the payouts for passengers are governed by the Montreal Convention, to which India is a signatory.
The minimum compensation per dead passenger under this framework could go up to 128,821 Special Drawing Rights, which works out to £134,000-£171,000, although the actual amount might vary depending on nationality, legal claims, and additional liabilities.
The Tata Group has already announced interim compensation of about £85,000 for each of the families of the dead. In addition, Air India has announced £21,000 in interim payment to the families of the victims as well as the sole survivor Vishwash Kumar Ramesh.
The claim for the plane’s hull and engine is estimated at around £93m, according to Ramaswamy Narayanan, chairman and managing director at General Insurance Corporation of India.
He estimates additional liability claims for loss of life of the passengers and third-party property damage at almost £260m.
This amount is more than triple the annual premium for the aviation industry in India in 2023, according to Bloomberg.
Given the large number of international passengers, including from the UK, Portugal and Canada, global reinsurers are expected to absorb much of the financial impact.
Air India has suffered additional losses, with bookings for flights dropping around 20 per cent on domestic and international routes in the week after the crash.
The airline cancelled dozens of flights after the crash and slashed ticket prices on key routes by up to 15 per cent, deepening its financial losses.
Air India has a 30 per cent share of the domestic passenger market.
The airline has a fleet of 198 planes, of which 27 are 10-15 years old and 43 are over 15 years old, the civil aviation ministry told the parliament in March.
It was ranked the worst airline for flight delays in the UK, where its departures were, on an average, just under 46 minutes behind schedule in 2024, according to an analysis of Civil Aviation Authority data by the PA news agency published in May.
Air India has been reporting losses since at least fiscal year 2019-20. It reported a net loss of about £386m on sales of £34bn in 2023-24.
The preliminary investigation report, Mr Wilson said, found no mechanical or maintenance faults with the aircraft. He added that all required maintenance had been carried out on the aircraft, and that the pilots had “passed” all pre-flight checks amid allegations that the disaster was caused by human error.
The report has triggered unprecedented checks on all Boeing flights to secure the safety of the fuel switches. India's aviation authorities set 21 July as the deadline for all airlines with Boeing jets to confirm the security of the switches.
Over 150 Boeing 737 and 787 aircraft are reportedly in operation across India, flown by carriers including Air India, Air India Express, Akasa Air, SpiceJet, and IndiGo.
South Korea’s flag carrier Korean Air Lines said on Tuesday it had proactively begun inspecting fuel control switches and would implement any additional requirements the transport ministry may have.
Japan Airlines said it had been doing such inspections since 2018. "Any issues detected were repaired on the ground, and therefore did not occur during flight," JAL said in a statement.
South Korea's aviation authorities said it was preparing to order all airlines in the country with Boeing jets to examine the switches.
Singapore Airlines said it had completed precautionary checks on the fuel switches of its 787 fleet, including aircraft used by its low-cost subsidiary Scoot.
