Air India paid $5.8mn “avoidable penalty” to Boeing – report

Air India (AI, Mumbai Int’l) made the “avoidable payment of a penalty” of INR438.5 million rupees (USD5.83 million) to Boeing for not complying with the timelines in a contract for servicing aircraft components, the Comptroller and Auditor General of India noted in a report for the year ending March 31, 2020.

The penalty was paid in August 2020 for “persistent delays in the return of removed components during the period July 2016 to December 2019,” the authority said in its Commercial Compliance Audit Report on Central Public Sector Enterprises (CPSEs) presented in the country’s parliament on December 21.

Air India had entered into an agreement with Boeing for the manufacturer’s Rotable Exchange Program related to the servicing of B787 aircraft, according to which the flag carrier could exchange unserviceable removed components with Boeing’s serviceable components.

According to the agreement, the airline was to deliver each removed part to the manufacturer within ten calendar days, failing which it was liable to pay late return charges. If the delay stretched to 20 days, it was liable for an additional penalty.

Air India defaulted on the late return fees and penalties accumulated during the period in question, after which Boeing sent it a letter in July 2020 suggesting a suspension of the scheme if payment was not received by July 31. Boeing subsequently served a six-month notice of termination and withdrew any discounts it had offered previously.

Auditor general representatives told the parliament that there had been 170 instances of delayed return between July 2016 and December 2017 alone, and in 88 of these cases the delay was between 30 and 214 days. The sizeable fine could have been avoided with more timely action, they explained.

According the ch-aviation fleets advanced module, among the total fleet of 124 aircraft at soon-to-be-privatised Air India are twenty-four B787-8s.