Fog losses push airlines to seek insurance

BANGALORE: Some airlines have seen the light through the wintry mist of losses: fog insurance. Air-India, for instance, has floated a tender for fog insurance and received bids from over a dozen companies. “We hope to choose a bidder by next week,” said S Venkat, Air-India’s executive director (finance).

Air-India is looking for insurance that will apply if foggy conditions persist for more than four days. In such circumstances, the insurance will cover losses on account of delays, rerouting or cancellation of flights, and provision of hotel accommodation to passengers. The insurance amount may range from Rs15 lakh to Rs1.5 crore, Venkat said.

This is part of Air-India’s strategy to minimise losses stemming from inclement weather. “Although the weather-risk cover will be limited to India initially, we will extend it to airports at London, Paris, Frankfurt, and New York, where fog and snow are more severe,” Venkat said. SpiceJet plans to get insured against not only fog, but also delays caused by technical snags, traffic congestion, and other exigencies.

“We are in talks with a few insurance companies and hope to zero in on one in a couple of weeks,” said Sanjay Kumar, vice-president (sales and planning). Sources said Tata-AIG is one of the companies to which SpiceJet is talking.

Air Deccan said its fog insurance scheme would be ready by next winter.

For at least 15 days every year, fog disrupts flights resulting in losses to the tune of Rs200 crore. “Air-India loses Rs5 crore every year due to bad weather,” Venkat said.

But this is not the first time fog insurance is being considered by airlines. A similar attempt was made five years ago, said Kapil Kaul, chief executive officer of the Centre for Asia Pacific Aviation. “But there weren’t many players in the insurance industry to find this type of solution to make up for losses incurred during fog,” he said.

Kaul said fog insurance can be financially viable if an airline has large operations: “But since there are many competing players in the insurance industry now, it may be worth exploring.” But Kaul said airlines must not lose focus on fundamentals such as training pilots and making their fleets CAT-III-compliant.

Kingfisher Airlines, which is equipped with CAT-III A, will not seek fog insurance. “We don’t expect to incur huge losses due to fog,” a spokesperson said. The state-owned Indian said it finds insurance too expensive an option to consider.