MC EXCLUSIVE Air India, Akasa Air and SpiceJet may face potential insurance premium hike to $40–50 mn, may increase airfares by 2–5%

Air India plane crash

Immediate aviation insurance premium adjustments are unlikely despite the catastrophic Air India flight crash, according to Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI).

However, the cumulative impact of multiple Boeing-related incidents could prompt insurers to increase premiums across the aviation sector, according to Bharindwal, with aviation experts noting that Boeing aircraft operators, such as Air India, Akasa Air and SpiceJet, are likely to face particularly significant hikes in the next underwriting cycle.

Air India, with 34 787s and 20 more on order, and SpiceJet, operating 737 MAX 8s, face potential premium increases from $28 million to $40–50 million, straining budgets and potentially raising airfares by 2–5 percent, analysts pointed out.

While many of Air India’s aircraft are leased, insurance costs, whether borne directly (liability) or passed on through lease terms (hull), still impact the airline’s operating expenses, making a 2–5 percent airfare increase plausible if premiums rise, sources said.

“While we don’t anticipate an immediate impact of higher insurance premiums on our ongoing lease agreements for our Boeing fleet, we are in discussion with lessors about new leasing contracts for further delivery on Boeing aircraft,” a senior official from Akasa Air told Moneycontrol.

He added that a variety of factors are likely to be taken into play before deciding the leasing fees for upcoming aircraft deliveries and a rise in insurance premiums may lead to a marginal increase in leasing costs.

Similarly, a senior official from Air India told Moneycontrol that further reasoning behind the crash of flight AI171 on June 12, 2025 will play a significant role in determining how insurance premiums of Boeing aircraft are determined, but added that current sentiments around Boeing aircraft have been impacted due to the crash.

Spicejet did not respond to emails seeking comment.

Aviation insurance premiums are calculated based on risk assessments, which consider factors like aircraft type, manufacturer reputation, airline safety records, and incident history.

Insurers and reinsurers use actuarial data to tailor premiums to specific risks, allowing them to charge higher rates for aircraft or operators deemed riskier.

The Air India crash arrives at a precarious time for Boeing, already grappling with regulatory and reputational challenges.

“Experts predict that the cumulative effect of Boeing’s MAX and 787 issues, now topped by the crash, will further harden the market.”

The 787’s quality concerns and this unprecedented loss could push premiums for Boeing operators like Air India and SpiceJet up by at least 20 percent and up to 100 percent in 2026, analysts further pointed out.

Insurers’ risk-based pricing enables targeted premium hikes for Boeing operators, as actuarial data highlights Boeing’s elevated risk profile compared to Airbus.

The broader implications of these heightened risk perceptions extend to airlines, passengers, and the insurance industry.

Moreover, Air India’s fleet retrofit and SpiceJet’s Rs 3,000-crore fundraising efforts could be strained by premium hikes, forcing cost pass-throughs to passengers.

Experts added, the AAIB’s ongoing investigation, analysing black box data with NTSB and Boeing support, will be critical. If 787 defects are found, Boeing’s liability insurers could face multimillion-dollar lawsuits, mirroring the MAX’s $2.5 billion settlements, further hardening the market.

Boeing’s risks amplified

The Boeing 737 MAX family’s troubled history and ongoing certification delays, coupled with 787 Dreamliner’s FAA audit pressures, have already hardened the aviation insurance market.

Now, the 787’s quality issues, such as reported fastener errors and falsified records, combined with the Air India crash, with claims split between Indian insurers and global reinsurers, could further elevate risk perceptions, according to analysts.

The 737 MAX’s troubled history began with two catastrophic crashes in 2018 and 2019 respectively, both linked to flaws in the Maneuvering Characteristics Augmentation System (MCAS).

These incidents led to a global grounding of the MAX from March 2019 to November 2020, costing Boeing over $20 billion in direct losses and $60 billion in cancelled orders.

The crashes exposed systemic issues in Boeing’s design, testing, and FAA oversight, with a 2016 internal survey revealing 40 percent of safety certification employees felt "undue pressure" to rush approvals.

The MAX’s fallout hardened the aviation insurance market, as insurers faced massive claims, including $2.5 billion in settlements, prompting significant premium hikes.

For instance, Air India’s aviation insurance premiums nearly doubled to $28 million post-2019, reflecting heightened risk perceptions for Boeing aircraft operators.

Ongoing certification delays for the 737 MAX 7 and MAX 10 exacerbate Boeing’s challenges.

Insurers may view these delays as indicators of ongoing operational and regulatory challenges, contributing to a hardened market where Boeing operators face higher premiums compared to Airbus-reliant airlines like IndiGo, they added.

As of June 2025, these variants remain uncertified, with timelines pushed to 2026 due to engine de-icing system flaws and stricter FAA oversight following the MAX crashes and a January 2024 Alaska Airlines MAX 9 door plug blowout.

The FAA’s revocation of Boeing’s authority to issue airworthiness certificates for individual MAX planes has added rigorous inspections, further elevating Boeing’s risk profile.

The Air India Flight AI171 crash on June 12, 2025, near Ahmedabad, the first fatal 787 incident, has amplified these concerns.
The crash has killed 241 of 242 aboard and triggered claims of up to Rs 300 million, as the Aircraft Accident Investigation Bureau (AAIB) probes potential manufacturing defects alongside human error or maintenance issues.

The Air India plane crash’s massive claims are likely to be split between Indian insurers and global reinsurers, as reported by Moneycontrol earlier.