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Wednesday, Mar 31, 2004

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Air India insurance premium maintains southward trend

Ashwini Phadnis

New Delhi , March 30

FOR the second year in a row, the state-owned international carrier, Air India (AI), has seen a southward movement in the insurance premium it has to pay to cover its fleet of 33 aircraft.

Sources told Business Line that while there has been a more than 20 per cent drop in the insurance premium, which the airline has been able to negotiate for its fleet, the southward movement was slightly less than what was witnessed last year.

During 2003, the airline witnessed a sharp 25 per cent drop in the insurance premium at $11.6 million or about Rs 55 crore, down from close to $13 million that it paid during the previous year. Last year, the official delegation, which was in London to negotiate the insurance premium, was able to convince the insurers that the airline's good track record, the high security standards that it maintained and weak demand in market merited a drop in the insurance premium that AI should pay.

The AI insurance cycle runs from April 1 to March 31 of the following year. The airline has a mixed fleet of Boeing 747-400 and Airbus A-310-300 aircraft, among others.

However, in the previous year, AI was also impacted by the happenings of September 11 and saw its insurance renewal premium shoot up to around $13 million during 2002-03 from just $8.4 million in the previous year.

But even then, AI was able to buck the market trend and though it reported a close to 50 per cent increase in its annual insurance for fiscal 2002-03, this was way below the average market increase in insurance premium of around 90 per cent.

During both the years, AI was luckier than several other international airlines. While in 2003, AI was able to achieve a drop in insurance premium, several other airlines, including the Israeli national airlines, El Al, the national airlines of the Philippines and the European airline, Iberia, were not so lucky.

Similarly, a year ago, while AI reported a close to 50 per cent increase in annual insurance, sources indicated that Singapore Airlines (SIA) saw an increase of more than 250 per cent in its insurance premium payout, while Malaysian Airlines (MAS) is said to have seen an increase of about 150 per cent in the insurance premium that it has had to pay.

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