India may use Obama visit to rekindle Dreamliner debate

India could use the upcoming visit of US President Barack Obama as leverage to put pressure on Boeing over its delay in delivering 787 Dreamliner aircraft to Air India, says Union Civil Aviation Minister Praful Patel. Speaking to Business Standard in New York, Patel said President Obama’s scheduled visit to India in November was a useful opportunity to exert pressure on the Seattle-based aircraft maker, from which Air India has demanded $840 million in compensation for the delays. 

Air India’s parent company Nacil had placed orders for 27 of the Dreamliner aircraft in 2006, and was originally supposed to get delivery of the first plane in 2008. 

Boeing announced on August 27 that it would postpone the start of its delivery of the long-haul aircraft to customers once again, to the first quarter of 2011. The deliveries to Air India are expected to be pushed back to the second quarter of 2011. 

Even before that announcement, Air India had increased its demand for compensation from Boeing, from the $710 million it sought in January 2009, to about $840 million. The airline has also asked for the return of its pre-delivery payment of nearly a quarter of a billion dollars, along with interest. 

Patel, who was in New York for the launch of the Nationalist Congress Party’s North America chapter, said the repeated delays in delivery of the Dreamliner had severely affected the expansion plans of Air India, as well as replacement plans for older aircraft. 

While Boeing received orders for twenty-eight 787 aircraft this year until August 31, it lost orders for 32 of the aircraft in the same period, for a net loss of four. Kenya Airways has said publicly that it would consider canceling its order for the 787s. 

But a cancellation was not on the cards for Air India at present, according to Patel. “It’s purely between Air India and Boeing, but as of now, what I have been informed is that Air India does not wish to cancel the contract, but certainly is looking at compensation for all the losses,” he said. 

Some irritants have already emerged on the business front that could cast a shadow on President Obama’s visit to India. US industry is upset with the nuclear liability legislation passed by the Indian Parliament, as it seeks to pin some liability on suppliers, going back on what they say was an undertaking given by the Indian government during negotiation of the nuclear agreement that liability would be channeled solely to operators. The Indian government as well as business groups strongly protested the US border security legislation recently signed into law by President Obama, that seeks to nearly double H1B and L1 visa fees to raise funds to combat illegal immigration. 

In this backdrop, the tussle over compensation to Air India from Boeing could further strain ties between India and the US on the eve of President Obama’s visit.