Air India crash: What families of victims can expect in compensation

Business Standard

13-06-2025

Following the tragic crash of a London-bound Air India Dreamliner shortly after takeoff from Ahmedabad International Airport, attention has turned to the financial and legal compensation available to the families of the 242 passengers and crew on board. Experts say compensation will be governed by the Montreal Convention of 1999, an international treaty to which India is a signatory.
According to Hitesh Girotra, Vice President (Aviation & Specialty Lines) at Prudent Insurance Brokers, compensation will be calculated under the Montreal Convention, which standardizes airline liability across international borders. India signed the treaty in 2009, making it applicable to this incident involving both Indian and foreign nationals.
Passenger Compensation: Governed by the Montreal Convention (1999)
India is a signatory to the Montreal Convention, a global treaty that standardizes rules on airline liability for passenger injury or death. This treaty applies when:
The airline's home country (India, in this case) and the passenger's nationality are parties to the convention.
The flight is international, which includes flights like Ahmedabad to London.
How much compensation is guaranteed?
As per the Montreal Convention, the airline is liable for damages up to 128,821 Special Drawing Rights (SDRs) per passenger regardless of fault.
As of October 2024, 1 SDR = approx USD 1.33, so:
128,821 SDR ≈ USD 171,341 per passenger (minimum).
Compensation applies regardless of the airline's fault up to this threshold.
Airlines may be liable for additional compensation if negligence is proven. "Compensation is calculated using Special Drawing Rights (SDRs), which stood at 128,821 SDRs (approximately USD 1.33 per SDR) as of October 2024. The actual payout will depend on the coverage purchased by Air India," Agarwal told PTI.
Nationality matters:
Compensation can vary slightly depending on passenger nationality due to how the treaty applies in cross-border cases.
The nationality of passengers—169 Indians, 53 British, 7 Portuguese, and 1 Canadian—determines precise entitlement.
This suggests each family could receive at least ₹1.5 crore, with interim compensation already in planning. Tata Group has announced an initial ₹1 crore per victim as immediate relief. What is SDR (Special Drawing Rights)?
SDR is a currency-like reserve asset defined by the International Monetary Fund (IMF), based on a basket of currencies including the USD, Euro, Yen, Pound, and Yuan. It's used to standardize international payouts.
Aircraft Insurance: Hull & Liability
There are two parts to aviation insurance:
1. Hull All-Risk Insurance
Covers damage to the aircraft itself, whether partial or total.
The crashed Dreamliner (VT-ABN) was a 2013 model, insured at approx $ 115 million in 2021.
This includes the aircraft, spares, and onboard equipment.
As far as aircraft damage is concerned, Agarwal said, it would be covered under the aviation hull all-risk section, which insures the current valuation of the aircraft, including spares and equipment.
For a Dreamliner, depending on its configuration, age, and other factors, this value can range between USD 211 million and USD 280 million, he said.
"The aircraft involved (VT-ABN) was a 2013 model and, based on available information, was insured for approximately USD 115 million in 2021. Whether the damage is partial or total, the loss would be covered based on the value declared by the airline," he said.
2. Liability Insurance (Passenger + Third Party)
Covers compensation to passengers, third parties on the ground, and property damage.
This insurance is purchased as a fleet policy, covering all aircraft operated by the airline.
Who pays for this? (Reinsurance Model)
No single insurer takes the entire financial burden.
Instead, the policy is reinsured across global markets (e.g., London, New York).
One major reinsurer (the "lead") takes 10–15% of the risk.
Others share 1.5–2% each.
The financial impact is distributed globally, reducing exposure for any one insurer.
According to Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI), aviation insurance programmes for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York.
"No single insurer bears the entire risk -- coverage is widely distributed among global reinsurers, with shares as small as 1.5 per cent to 2 per cent and a lead reinsurer typically taking 10-15 per cent. The financial impact of such incidents is shared globally across this network," Bharindwal said.
It is too early to ascertain the overall liability (passengers and third party) on the operator because of this crash.
Interim and Final Payouts
While interim compensation may be announced by Air India shortly, final settlement amounts will be based on the Montreal Convention. "This ensures global standards of accountability and fairness," said Amit Agarwal, MD and CEO of brokerage firm Howden India.
He noted that Air India's insurance coverage will significantly influence the final payout amount. The airline has reportedly insured the crashed Boeing 787 (registration VT-ABN), a 2013 model, for approximately USD 115 million under aviation hull insurance as of 2021.
The combined value of aircraft damage, passenger liability, and third-party claims could easily exceed ₹1,000 crore, industry estimates suggest. This is higher than the total annual aviation insurance premiums collected across all Indian airlines, highlighting the magnitude of the event.
The insurance payouts are expected to begin with interim payments, followed by comprehensive settlements after formal investigations and claims verification. Legal experts say payouts could take months or even years to complete, depending on whether claimants pursue additional damages.I What you should know
Key points:
Families of deceased passengers are eligible for automatic compensation of ~$171,000 under international aviation law.
Higher payouts may occur if Air India is found negligent.
The aircraft loss is insured and will be reimbursed.
Liability risk is shared across global insurers, minimizing the impact on any one entity.
With inputs from PTI