Tata Sons-owned Air India has clarified that the ex-gratia amount of Rs 1 crore announced by Tata Sons -- and interim compensation of Rs 25 lakh being distributed to passengers since June 20 -- is not the final compensation being paid to the families of those who died when flight AI 171 crashed.
In a letter to the Directorate General of Civil Aviation (DGCA) dated July 1, Air India said that it is distributing Rs 25 lakh as “interim compensation” to affected families, meaning, this amount is merely an advance, meant to help families with immediate needs.
It is not the final compensation, and will eventually be adjusted against the final amount once the compensation process concludes, the airline clarified in its letter to the DGCA.
A copy of the letter was seen by Moneycontrol.
On June 30, DGCA asked Air India to clarify its compensation plan for victims of the June 12 crash of flight AI-171 near Ahmedabad, amid concern over a mismatch between interim payouts and international legal obligations.
While the airline had announced an ex-gratia payment of Rs 1 crore per victim, it did not provide details of the legally mandated insurance compensation.
Ex-gratia payments are voluntary and made out of goodwill, not as part of a legal obligation, said Hari Radhakrishnan of the Insurance Brokers Association of India (IBAI).
Under the 1999 Montreal Convention, which governs airline liability for international travel and is part of Indian law, Air India is liable to pay up to Rs 1.5–1.85 crore per passenger, regardless of whether it was at fault or not.
The figure is based on the Special Drawing Rights (SDRs) system maintained by the International Monetary Fund (IMF), and the liability limit mentioned in the Convention is 100,000 SDRs per passenger for death or bodily injury.
Air India, in its letter to the DGCA, also said that the ultimate amount each family receives will be determined under the Montreal Convention (1999), which is an international treaty governing compensation in aviation accidents. Per this framework, factors like the victim’s age, occupation, and financial dependents are considered.
This process is currently underway.
The DGCA reached out to the airline after multiple organisations, including the International Civil Aviation Organization (ICAO) and the Airline Users’ Rights and Grievances Redressal Forum (AURGRF), wrote to the regulator seeking intervention over Air India’s compensation plan.
Additionally, sources said, the Insurance Regulatory and Development Authority of India (IRDAI) has also directed insurers to expedite claims related to the crash under various insurance policies.
Moneycontrol had earlier published a detailed explainer on the insurance claims process in the Air India case, noting that travellers aboard international flights are covered by passenger liability insurance, which is built into the ticket price and provided by the airline.
This is a mandatory part of aviation coverage and is governed by the Convention, which India is a signatory to.
If families pursue further legal claims, higher compensation may follow if negligence is established.
This ensures a standard minimum level of protection for international flyers, over and above one's personal insurance.
While the airline may compensate per the Convention, say, Rs 1.75 crore, separate payouts from personal policies can add to this, provided claims are properly filed.
The total passenger-related liability in this case is expected to be around $350 million, according to experts, and just like hull insurance (for damage to the aircraft), the liability is largely reinsured. Indian insurers retain a nominal portion, around 5-10 percent, while the rest is shouldered by international reinsurance firms.
According to an earlier Moneycontrol report, legal experts have criticised Air India’s handling of the compensation process. Over 40 families represented by the UK-based Stewarts Law have accused the airline of coercion and intimidation as they pursue claims related to the crash in which over 250 people were killed.
Peter Neenan, an aviation lawyer and partner at the UK law firm Stewarts, has represented families in a number of large airline disasters around the world, including the high-profile MH17 and MH370 crashes.
Neenan, in a public statement dated July 2, noted that the airline’s treatment of grief-stricken families could save it at least £100 million by under-compensating them.
"This is the real horror of what they’re potentially looking to do,” he noted, calling for an investigation into the airline’s behaviour.
Neenan, in the statement, alleged that relatives arriving to identify their loved ones’ remains in the days after the crash were put in a crowded, dark room in intense heat with other bereaved families, and told to fill out documentation and a complicated questionnaire asking for important financial information.
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