Bloomberg News

Boeing Disputes India Report of $500 Million 787 Payment

March 14, 2012

A Boeing Co. (BA) executive disputed the Indian government’s statement that the planemaker agreed to pay state-owned Air India Ltd. $500 million in compensation because of delays delivering 27 composite-plastic Dreamliners.

“I think if we settled for $500 million, somebody would have told me,” Jim Albaugh, president of Boeing’s commercial aircraft unit, said today at the JPMorgan Chase & Co. aviation, transportation and defense conference in New York. “We don’t comment on deals that we’ve done, but I can tell you that we’re not writing anybody a check for $500 million.”

Airlines sign up for delivery slots when they place orders, and Boeing faces penalties for late planes such as the 787 Dreamliner. The aircraft was about three years behind schedule when it was turned over to its first customer last year.

“Mitigation is tailored to meet the needs of our customers and can take on many different forms,” Marc Birtel, a Boeing spokesman, said in an e-mailed statement today. The planemaker is “working with customers on addressing the contractual requirements as they take delivery of their airplanes,” he said without elaborating.

Prashant Sukul, a joint secretary at India’s Civil Aviation Ministry, told reporters at the country’s Hyderabad air show today that the planemaker agreed to the payment two weeks ago. Air India may get further compensation as it previously asked for $840 million and it has since asked for more because of further delays, he said.

May Delivery

The carrier will get its first 787 in May and it will no longer be the second operator of the plane, Sukul said. Delivery was delayed from last year because Boeing is still working with the carrier on certification, pilot training and introduction plans, said Dinesh Keskar, the planemaker’s India head. He declined to comment on compensation.

All Nippon Airways Co. received the first 787 in September, ending years of delays caused by struggles with new production techniques and materials.

Air India is separately getting a 67 billion rupees ($1.3 billion) state bailout because of losses, Chairman Rohit Nandan said today at the Hyderabad show, which features a 787 in the carrier’s colors. The unprofitable airline has already received 32 billion rupees in government bailouts since April 2009 as it struggles with fuel and loan costs.

Production of 787s has risen to 3.5 a month ahead of schedule, as Boeing works toward a goal of making 10 a month by the end of next year. The Chicago-based planemaker didn’t hand over any Dreamliners in February as it worked on replacing improperly installed shims. The shims are patches about the size and thickness of two sheets of legal paper, used to fill gaps in the aircraft’s plastic fuselage.

Boeing had delivered a total of five 787s by the end of last month, all to Tokyo-based ANA. It had won a total of 868 Dreamliner orders, according to data on its website.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net.

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.


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