Air India demands $1 billion over Dreamliner delays

Air India increased its demands for compensation from Boeing to about $US1 billion ($A920 million) following the planemaker's delays in delivering new 787 Dreamliners, an India civil-aviation ministry official said in New Delhi.

The talks won't affect deliveries, and there's room to negotiate until all 27 Dreamliners on order have been handed over to the state-owned airline, said the official, who asked not to be identified citing government policy. Boeing, based in Chicago, declined to comment.

Air India had said in August 2010 that it would seek $US840 million from Boeing, whose new 787 hadn't yet entered service at that point. The carrier's order would be valued at about $US5.7 billion, before traditional discounts off the plane's average list price of $US211 million. The Dreamliner was 3-1/2 years late when it began passenger service in November, after seven delays related to new materials and manufacturing processes used.

"I might believe $US300 million if all 27 planes were all very late, but $US1 billion seems pretty dreamy" for a compensation payment, said Joe Campbell, an analyst with Barclays Capital in New York.

Boeing has said it's still in negotiations with customers over the delays, which forced some airlines to revise route plans or order other models to fill the delivery gap.

Boeing repeated in a February 9 filing that it plans to build 10 Dreamliners a month by the end of 2013 as it works off a backlog of more than 800 orders for the model. The company said it will reach a delivery rate of 10 a month by early 2014.

"The scale and duration of the 787 program is such that relatively minor changes in assumptions or variables could have a material effect on our reported results in any period if the program is determined to have a reach-forward loss," Boeing said. The model has a low single-digit profit margin, it said.

Air India's compensation demand includes $US145 million in the form of liquidated damages as part of the sale agreement, the person said. The airline will probably receive its first 787 this month, an Air India official said Feb. 3.

Bloomberg