Cash-strapped IA shells out about Rs 2.5 crore

Poor decision-making by officials of the cash-strapped Indian Airlines (now Air India) resulted in payment of about Rs 2.5 crore (Rs 250 million) as compensation to a British firm for aborting a pilot training contract.

Indian Airlines entered into an agreement with Storm Aviation Ltd, UK, for imparting simulator training to its senior trainee pilots. Under the agreement, the airline guaranteed to deliver a minimum of 66 trainees over the first three months of the term that cost pound 11,380 per candidate (Rs 820,000 at the current exchange rate).

This was stated by the National Aviation Company of India Ltd, which runs Air India, in reply to an RTI application.

If the number exceeded 66, an additional fee of pound 11,000 for each trainee was to be paid. However, the pact, signed on October 15, 2004, did not last even a month as IA discontinued the training after the first batch of 10 pilots.

Storm Aviation then filed a lawsuit in the High Court of Justice, Queen Bench division, Commercial bench London, demanding about pound 500,000 in compensation from IA, along with additional per day interest of pound 118.67 from November 8, 2004.

Indian Airlines, instead of contesting the case, settled the matter out of court by paying pound 350,000, which translates to over Rs 2.5 crore (Rs 250 million) at today's exchange rate.

Surprisingly, the training was already provided by the airline's central training establishment at Hyderbad before officials from the operations and training department decided to outsource it to Storm Aviation.

The British firm managed by IACL was preferred over SAS Flight Academy, Stockholm in Sweden, and Aero Madrid, Spain, the other two shortlisted training centres.

Soon after the contract broke down, the training was again started by the central training establishment, raising questions about the need for such an arrangement where the airlines ended shelling out compensation.