Who Pays The ₹1 Crore Compensation After A Flight Crash?
After the tragic crash of Air India flight AI171, a Boeing 787-8 Dreamliner from Ahmedabad to London Gatwick, there might be questions about who is responsible for financial compensation in such incidents.
The Tata Group-owned Air India announced a compensation of ₹1 crore to the next of kin of each deceased passenger. While this was widely reported as a generous gesture, the reality is that this payment is not a goodwill offering; it is a legal requirement under the Montreal Convention, an international treaty that governs airline liability in case of accidents.
Under the convention, which India is a signatory to, airlines are obligated to compensate passengers (or their families) for death or injury during international travel.
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The minimum compensation is 151,880 Special Drawing Rights (SDRs) per passenger, roughly ₹1.8 crore at current exchange rates (with one SDR valued at approximately ₹120). This amount is mandated regardless of fault, meaning the airline must pay even if no negligence is proven.
Crucially, this compensation does not come directly out of Air India’s operating funds, nor is it a financial hit to the Tata Group. Like all commercial carriers, Air India insures its fleet and its liability. The payout to passengers’ families will be handled by the insurance company that underwrites the airline’s policies.
As per aviation insurance, it covers both aircraft loss and liability to third parties, including passengers, crew, and, in some cases, people on the ground. The total loss in such an incident may be estimated at around $130 million, which includes $80 million for the aircraft and $50 million for liabilities, including passenger compensation.
The Montreal Convention also requires airlines to make advance payments to families of the victims to cover immediate expenses. This is separate from the final compensation and is meant to support funeral costs, temporary housing, or other urgent needs. The amount is pegged at 16,000 SDRs, or around ₹18 lakh per passenger, and must be paid without delay—even before the official investigation is complete.
If Air India complies fully with the Montreal Convention’s provisions, the compensation owed to passengers alone will exceed ₹377 crore. When including potential claims from the crew’s families, whose compensation typically falls under labour laws, contracts, or separate insurance, the total figure could cross ₹412 crore.
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Moreover, if it is established in court that the airline was at fault due to negligence or failure to follow regulations, additional compensation beyond the SDR cap could be awarded.
These damages are calculated based on factors like the deceased’s age, income, dependents, and more. However, claimants must prove fault in court to receive anything above the Montreal Convention cap.
AI171 crashed into the campus of a medical college, leading to casualties on the ground as well. Unlike passenger compensation, third-party damage and loss of life outside the aircraft are not covered under the Montreal Convention. These cases are typically addressed under domestic tort laws or local aviation liability frameworks, adding another layer of legal and financial complexity.
Beyond the tragic loss of life, the aircraft itself represented a significant capital asset. The Boeing 787-8 Dreamliner cost Air India between ₹1,040 crore and ₹1,450 crore when it was acquired. It was one of the airline’s flagship models for long-haul operations, and the destruction of such an aircraft represents a material loss that will also be covered under the airline’s hull insurance policy.
