Air India defers insurance premium for three months: Not a good move.

Already the Indian aviation industry is under serious financial pressure and the Air France aircraft crash added another problem for the Indian aviation companies; reinsurancing their planes. Before reading this news, I did not know that airlines have to insure their planes and they have to pay a large amount of money for premium. Already the Indian air lines, both private and public, incurred huge losses and facing cash crunch. At such a situation, paying premiums to renew their insurance is really a serious issue.

Vijay Mallya’s Kingfisher Airlines paid more than half billion rupees ($10.5-11 million) in foreign currency to cover its 74 aircrafts against Rs. 380 million in 2008. The company is looking forward to raise money to cover its losses. Kingfisher bought insurance worth $3.09 billion from ICICI Lombard that became effective from June 24, 2009. Indigo Airlines, another domestic airlines, is scheduled to pay its premium within July 31, 2009. Jet Airways cleared its insurance premium at the beginning of the current financial year and it did not have to pay higher insurance premium.

However, Air India, the state-run airlines, deferred the renewal by three months. It is afraid that it would have to pay higher amount of premium and it does not have the capacity to do so. Air India took government bailout money and could not even pay the monthly salaries of its employees. Under government rule, Air India has the capability to defer its renewal by three months.

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