Airlines breathe easy as US government bails out AIG

Written by Shaheen Mansuri | Mumbai, Sep 18 | Updated: Sep 19 2008, 08:07am hrs
Airlines in India heaved a sigh of relief following the American International Group (AIG) bailout. The US government infused $85 billion in the ailing insurance company yesterday. As a re-insurance group in India, Tata-AIG (a joint venture between Tatas and AIG in which the former owns 74% and AIG the rest) is a lead insurer for airlines like Delhi-based low cost carrier SpiceJet and Mumbai-based GoAir.

It may be noted that national carrier Air India had invited bids from several insurance companies including Tata-AIG for comprehensive policies coverage against losses due to foggy conditions, said an official at Air India. However, Jitendra Bharghav, director (PR) Air India told FE, We have tied up with ICICI-Lombard for several travel policy covers. Therefore, there is no reason for us to panic.

An analyst from a Mumbai-based brokerage said that GoAir had earlier this year entered into a deal with Tata-AIG to offer insurance cover for online bookings. But it has no reason to panic since the Tata Group has 74% stake in the venture and therefore interest of policy holders will not suffer, he said. Tatas will have no problem in even buying out the minority stake in the venture, he added.

On the other hand, an official at SpiceJet said that there were rumours that consumers would have to pay a higher premium if they had a travel related policy when booking air tickets with the airline. But with the US government bailing out AIG of direct consequences, it sounds like a breather to those associated with AIG directly or indirectly, said the analyst.

Meanwhile, an official from AIGs travel insurance team in Mumbai said that the financial crisis at AIG will not pose any immediate threat to its India operations.

He noted, There is no solvency ratio problem for any of our operations. With infusion of new capital, there will not be any problem.

A press release issued by AIG on Wednesday evening stated that the groups insurance businesses worldwide and including Asia continue to operate normally and remain adequately capitalised and fully capable of meeting obligations to policyholders.