Air India's 6th Boeing 787 Dreamliner seen on the factory floor in Everett, WA. Photo by Jeremy Dwyer-Lindgren.
Things for Air India aren’t exactly going so great right now. The airline is in the middle of a pilot strike that has been going on since May 8th and has cost the airline over $63million, due mostly to international flight cancellations. Over 200 pilots have called in sick and the airline has responded by firing over 100 of them.
Back in 2005, Air India placed orders for 27 Boeing 787s and was originally supposed to take delivery starting in September 2008. Obviously that did not happen with the delays of the Dreamliner.
It was expected that the airline would take delivery of their first Dreamliner by the end of May 2012, but almost un-noticed, no aircraft have been delivered.
According to MyDigitalfc.com, “Air India was earlier supposed to receive the first Boeing 787 Dreamliner aircraft by this month-end, but the delivery was delayed due to technical issues revolving around last minute checks relating to minor glitches in interiors.” It seems like it might be more complicated than that.
It appears that Air India is trying to receive compensation for the delays of their aircraft and are refusing to take delivery until an amount is agreed upon. If this sounds familiar, it is because Cargolux pulled something similar with Boeing before taking delivery of their 747-8Fs.
One of the concerns raised by the striking pilots is that many who are being re-trained to fly the 787 are from the ex Indian Airlines (which was merged with Air India in 2011). According to The Hindu Business Line, it would cost about three times as much to train ex Indian Airlines pilots to fly the 787 versus Air India pilots, so it doesn’t quite make sense.
Earlier today, the Wall Street Journal reported that the Indian government is planning to invest 12 billion rupees ($215.6 million) into the faltering airline. For now, it seems Air India will stay afloat, even though it has lost large amounts of money over the past five years.
So, will Air India ever take delivery of their 787 Dreamliners and why are they delayed? Emails to Air India have gone un-answered and at the time of posting this story, Boeing is working to answer some questions posed by AirlineReporter.com.
Boeing has billions of dollars worth of aircraft currently sitting at Paine Field, which I am sure they just want to deliver to their customers. It seems like odd timing that Air India, which doesn’t really have any pilots to fly the 787 right now (or money), is aggressively seeking cash from Boeing, just days before intended delivery.
UPDATE:
Boeing has written back and explained, “We look forward to delivering the first 787 Dreamliner to Air India, but we don’t discuss details of our delivery plans and defer to our customers to announce their own timing.” When asked if there were any technical issues that contributed to the most recent delay and if the 787s are currently ready for delivery, Boeing stated, “We don’t discuss those topics.” This is not too surprising, since Boeing is still in the middle of negotiations with Air India.
The NYDailyNews is reporting that a compensation package offered by Boeing has been accepted by the Air India board and now needs to be approved by the the Cabinet Committee on Economic Affairs (CCEA). The CCEA is planning to meet with Boeing tomorrow, Thursday.
According to the Wall Street Journal, Air India is expecting to receive their first 787 Dreamliner later this month.
Boeing is being made to pay for Air India mistake, mismanagement and ineptitude.
Uresh… you mean Air India or Boeing missed the mark here?
Ho I meant Boeing. Air India and Boeing had agreed to compensation for the delays. since that time, Air India’s financial problems have only worsen and the GoI saw an opportunity to wrangle some cash from Boeing to help pay for AI’s ineptitude and mismanagement.
Nonsense. Don’t mix up Air India’s mismanagement and Boeing’s mismanagement.
AI has plenty of it’s own problems, but Boeing has screwed up big time on the 787 – it’s THREE YEARS LATE. AI deserves compensation for that. They are trying to maximize the amount of compensation they can get. If they weren’t doing that, it would be mismanagement and ineptitude.
I agree, they should be looking to get compensation, but the timing is off. They had plenty of time to work this out with Boeing, why do it now?
David
Until now, it wasn’t really clear how long the aircraft would be delayed for.
That said, I agree – a compensation agreement should have been agreed to months ago.
Let’s get the facts in line first:
1) Earlier this year Boeing and Air India had agreed to a compensation scheme. This has been reported by AI to the Indian media to be about $500mm
2) Boeing continued to prepare 787s for delivery under the assumption (which is correct at the time) that the compensation issue has bee nsettled…why else would they expend resources to prepare these planes for delivery?
3) During the time since the compensation scheme was agreed to AI financial and labor situation gotten worse by a huge magnitude.
4) Just days before Air India was to take official delivery the they demanded more compensation on top of the agreement that they had with Boeing.
Why would they do this? Well it’s becasue they saw an opportunity to squeeze Boeing for more money with the planes complete. They needed this money because Air India managment and the GoI incompentance in running the airline had caused billions of dollars of losses at the carrier. They want more money from Boeing because of AI incometance and mismangement. Boeing had already paid for their mistakes and that was arranged through the first compensation agreement. Now AI and the GoI comes back and essentially etorts more money from Boeing when they’re ready to take delivery. That’s BS.
Uresh, you mean to say that Boeing not able to make delivery in time was Air India’s mistake abd result of Air India’s mismanagement.
I think what he’s saying is that Air India is playing hardball because they need the cash badly enough that they feel like they have to. Unlike JAL, the 787 delays weren’t necessarily causing the aircraft to come at a better time financially for Air India.
AI is playing hardball because it feels that is how it will get the most compensation. If it weren’t trying to get the best deal for the Indian taxpayer, perhaps that would be mismanagement.
As for the delays, they’ve made the 787 come at a terrible time financially for Air India – the original delivery date would have been before all the merger issues started costing AI a lot of money.
That’s pretty much what I said.
Like what Peter said above. Uresh is referring to the fact Air India are up s***s creek without a paddle and this is only there way of getting more cash to help them survive and to play hardball with Boeing. Air India have been in trouble for years due to the higher up people trying to run a business. Im sure ANA and JAL have been compensated but you dont hear them or see them not taking deliveries. Air India need these to compete and help save money, so its a no brainer.
It’s not about that – it’s a cultural difference. In the middle east and south asia, businesses play hardball. That’s why CargoLux played the same game last year when Qatar Airlines got a seat on the board.
In Japanese culture, doing business through the media would be looked down upon. So it doesn’t happen.
AI is in financial trouble, but don’t mix up that issue with the fact that AI still deserves compensation for the late deliveries.
Uresh remarked above that Boeing and Air India had already come to an agreement, and now AI is trying to force one even more favorable to them. If this is true, is hardly a “fair” deal, and I bet there are airlines who would be happy to refit the Air India jets with their own interior and slap on a new coat of paint to get their jets sooner.
AI and Boeing came to an agreement, but the agreement was rejected by a Indian Government committee. That committee needs to approve the compensation agreement before AI can actually sign off on it.
It looks like AI and Boeing have come to a new agreement, once again pending the outcome of that committee’s decision.
And I’m sure Boeing is well aware that they don’t need to offer a juicier deal. The more I read about the issue the more I hope Boeing just sells them to someone else.
Most of the planes on Paines field (the Boeing factory) are undeliverable because they need repairs to bring them up to deliverable standard.
Some have been there a long time before the more recent approvals have been given which they do not meet.
VT-ANH, the first aircraft to be delivered to AI, has been more or less ready for delivery since May 25th.
VT-AND is the first to be delivered (whenever that happens) to AI. It’s ready right now.
“According to The Hindu Business Line, it would cost about three times as much to train ex Indian Airlines pilots to fly the 787 versus Air India pilots, so it doesn”t quite make sense.”
That’s according to the IPG (union of striking pilots), not The Hindu Business Line. The IPG and ICPA (ex-Indian Airlines) pilots have completely different numbers to show with regards to training costs. In the end, it looks like the IPG’s numbers are grossly overinflated, and the ICPA’s numbers are underestimates.
“Emails to Air India have gone un-answered and at the time of posting this story,”
You will not get an answer from AI unless you have a source there. Media relations is completely swamped right now, and they aren’t replying to anybody who isn’t affiliated with a major newspaper (FlightGlobal or Times of India types).
Surely the figures quoted by both unions are wrong. The fact is the training provided is FREE as per the documents provided to various embassies for obtaining visas for the training of the pilots. Air India has received some points to train their pilots on 787. Incase they train a 777 pilot then points used are less, and in case they train 320/330 pilot the points used are more. Also Air India has it 787 sim in Bombay which is lying unused.
I’m seeing where Air India is demanding 1 Billion Dollars in compensation where as the contracts they and Boeing signed has a compensation clause for delays that equals to about half of that or maybe even less. Air India does deserve compensation…… but they are wanting way and above what was agreed upon and that I find hard to sympathize with Air India in this matter. Hope it gets settled soon.
The delays in 787 production may be fortuitous.
The airlines of India, especially Air India and Kingfisher, are very troubled financially among other issues. Privatization allowed tremendous expansion of services, yet, Air India (and Indian Airlines) remained in government hands creating what some consider unfair competition.
If the 787’s were delivered on time, around 2009, Air India’s financial position may have been even worse thru the global recession via the capital outlays alone. In the intervening period some Indian based airlines even deferred long-haul aircraft (like Jet), and Kingfisher totally discontinued long haul flights altogether.
Might Air India wish it could delay 787 deliveries even longer using compensation demands as a ruse? Even the government needs an excuse to save face.
While AI has been troubled recently, before 2005, they were actually profitable.
The 777s which AI has been operating on USA routes has caused tremendous losses, but they cannot cut USA routes due to political interference. Using 787s during non-peak seasons on their ultra-longhaul routes will significantly reduce costs and improve yields (due to right-sizing capacity). If the 787s were delivered on time, I don’t think there is any doubt AI would be in better financial shape today.
AI does not need to delay 787 deliveries due to financial issues – they have their financing lined up and ready to go.
The 777s didn’t cause the losses, the way they’ve mismanaged the routes caused the losses. If assigning 777s to routes at frequencies not fiscally capable of supporting them under current conditions is the problem, it’s not the 777 that is the problem. Sure, 787s would be nice on those routes, but if the 787s are badly managed, they’ll prove just as troublesome.
And yes, AI does need to delay due to financial issues. With or without finances lined up, they still have to start making payments once they’ve taken delivery.
The 777s were put on those routes due to political reasons – it is not optional for AI to serve the US nonstop and daily.
Putting the 787 on those routes would have saved a ton of money.
As for financing – AI already has financing, and they have had it for a while. That means that they can afford the payments for delivery. The cash is available to them.
Sorry – I should have clarified. The cash available for payments has been guaranteed by the Government of India a few months ago, once it became clear that the delivery would take place soon.
Not Boeing’s problem. I’m pretty sure Batik would be happy to have five of the Dreamliners produced for Air India if the Indian government refuses to play ball.
@Rohit Rao
So, it is government “political interference” which forced Air India to fly 777’s unprofitably? Which part of a government owned operation is not “politically” influenced? And, aren’t accounting results for any government owned operations rather arbitrary?
It might be simply, India bought too many aircraft just before the global recession.
Oh, and thank goodness Air India didn’t buy those 10 A340’s the AI’s board approved. Fuel burn rate alone would have made them even more “unprofitable.” In hindsight Air Minister Palel made some good decisions and then some bad ones. Who would have known?
Then, with regards to late 787 deliveries, aren’t most new technology products “late?” More specifically, take newly designed aircraft, aren’t most “late” for one reason or another?
But, thank goodness (again), Boeing had Alan Mulally instead of some government appointment heading the 777 project. “Political interference,” would have made it 7-late-7 too.
Yes, it is political interference. The Civil Aviation Committee in Rajya Sabha passed a resolution stating that AI must maintain a certain international operational profile, which includes daily nonstops to multiple US cities as set out in the report.
Things like Air India’s Frequent Flyer program are not really politically influenced.
Accounting results are not arbitrary – they are generally fact based.
I agree, AI bought too many aircraft before the recession.
I don’t think anybody doubts that Praful did some good things and some bad things. It’s just that in hindsight, the bad outweighed the good in many ways.
Most new technology products show up when they are contractually guaranteed to.
Most newly designed aircraft are late, but predicting a 3.5 year delay in advance is unreasonable.
I don’t see the parallel between Alan Mulally/government appointee and Air India.
No I meant Boeing. Air India and Boeing had agreed to compensation for the delays. since that time, Air India”s financial problems have only worsen and the GoI saw an opportunity to wrangle some cash from Boeing to help pay for AI”s ineptitude and mismanagement.
Air India are in such a bad financial state that they probably need the half-billion compensation to pay for the first two 787 deliveries…
;o)
Nonsense. AI has had financing lined up since 2008.
Financing for which they have to start making payments when they’ve taken out the loans.
@Ken Fielding
Only “half?” billion?
How about “one” Billion? That’s what the press is reporting on their demands. The final results may not be released, but it could be a combination of some relief in aircraft cost, in maintenance and discounts on future purchases.
Long term, that money may not help Air India. One assistance step is to privatize them and see if they can make it. But, it’ll be hard to extricate them as they’re so entrenched, so integrated in emerging/third-world methods of getting things done. A “half” billion in cash will simply disappear and the pilots will still be bickering, “We want to fly 777’s. No. You can-Not!!”
The original demands was 1 billion. Then they dropped their demand to $700 million. Now it is reportedly around $400-500 million, and Boeing has agreed to that it appears.
Air India’s strategy was to ask for the moon and hope to maximize the atmosphere they end up with.
As for long term, I think the money will help Air India. The restructuring plan passed by the government actually looks to be at least somewhat effective at getting the airline turned around, at least to the point where a private invest would be interested in touching the carrier.
So many “new technology products” are either delivered later than planned, either to market or to contract, they’re hard to count. And, in many cases, products are delivered with a higher degree of unfixed/unimplemented EC’s (engineering changes) just to be “on-time.” Plus, some products are delivered with a calculated risk factor over actual testing.
Today we undoubtedly look at the 787 as one big example of a late civil aviation product to market, and in hindsight, understanding the risks Boeing took, especially in its supply chain and “all” electric design, “3.5 years” seems rather short.
Could the A380 have been delivered on-time had the Airbus standardized on one version of CATIA? What was their calculated delivery and engineering risk substituting lighter CFRP for aluminum alloy wing parts?
Outside civil aviation, how’s Lockheed’s F-35 project going? On-time? Were Microsoft’s Visa, the Newton on-time? Ford Sync? India’s Rohini?
So, more broadly, I’d disagree, “most new technology products show up when they are contractually guaranteed to.” You may have put it best in, that’s “Nonsense.”