Air India has finalized its insurance deals for the new financial year that began on April 1. The airline reportedly got a good deal even as global factors, including the conflict in Ukraine, pushed up rates of higher. Tata AIG General Insurance, part of the Tata Group which also owns Air India, has emerged as the largest insurer this year.
$10 billion of insurance cover
A Business Standard report states that Air India will pay a premium of $30 million this financial year which will provide insurance cover of $10 billion, including for its low-cost international subsidiary Air India Express.
Last year, the airline received insurance cover of $8 billion, but with a planned increase in the fleet this year, the coverage has also increased. The report states that the current insurance coverage is for 140 aircraft of Air India and 26 Boeing 737 planes of Air India Express.
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Reports of Air India finalizing an insurance deal have been doing the rounds for the past few months. In February, it was reported that several insurance companies wanted to do a deal with Air India, and the airline was also in a better position to negotiate rates after being privatized.
Tata subsidiary becomes primary insurer
This year, Tata AIG General Insurance, a joint venture between the Tata Group and American International Group, got the largest share of the deal. This is given at about 36% of the premium this year, plus others.
Tata AIG received a 30% share in coverage last year, while New India Assurance got the highest share of 40%. Indian insurance companies retain only 5% of the premium and pass the rest to foreign insurers to keep their books risk-free.
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Apart from these two companies, GIC Re, United India Insurance, Oriental Insurance Company, and ICICI Lombard General Insurance are also reported to be the insurance providers for Air India this financial year.
Renewed confidence
The latest development comes after several European-based multinational companies met with airline officials in London to discuss the structure of insurance deals. In the last few months. Air India’s change of ownership has made it a profitable company to do business with.
The airline recently celebrated the initial phase of its five-year transformation program, detailing improvements to the customer experience, fleet optimization, and cabin renovations, among others. A lot has been done in the last six months compared to the previous years when Air India was run by the government.
Photo: Airbus
The airline also expects hundreds more planes in the coming years as part of its mega 470-aircraft deal with Boeing and Airbus. Since its fleet is set to be bigger, we can probably expect heavier insurance premiums in the coming years.
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Source: Business Standards