Tuesday, March 25, 2008


AI faces pressure from Italian seat suppliers as dollar weakens

New Delhi, March 24 Air India is facing pressure from its suppliers to be compensated for the weakening of the dollar against the euro. Italy-based aircraft seat manufacturing company Avio Interior has approached the airline for making good the lower realisation arising to it on account of the transaction being invoiced in dollars.

In late 2006, Air India chose Avio Interior to provide seats for the 23 Boeing 777 aircraft being procured by it. The decision to go with the Italian seats was taken not only because the price being quoted was the lowest but also as an eminent panel had recommended it, officials said.

At the time of signing the contract, it was agreed that the billing for the contract would be settled in dollars. Since then, the dollar has depreciated more than 25 per cent against the euro thereby lowering the earning of the Italian company. This has prompted the company to approach Air India for seeking a way out of the financial problem it finds itself in.

While officials refused to disclose the value of the deal, sources indicated that the compensation being sought could run into several millions of dollars.

The matter was taken up at the airline board meeting held here late last week and the feeling is that Air India has a strong case not to pay the compensation being sought. Sources felt that the Italian company should have hedged the contract and not asked for payment only in dollars.

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