Rs 1 Crore Ex-gratia Not The Final Word: Air India Clarifies Compensation For Crash Victims Still Underway

More than three weeks after the fatal crash of Air India flight AI-171 in Ahmedabad, questions around compensation for the families of victims are still being raised. Now, in a formal communication to India’s aviation regulator, Air India has clarified that the Rs 1 crore ex-gratia payment announced by its parent company Tata Sons is not the final compensation for the deceased.

In a letter dated July 1 to the Directorate General of Civil Aviation (DGCA), the airline stated that the Rs 25 lakh currently being distributed to the victims’ families is merely an interim compensation, not a final settlement.

This amount is meant to address immediate needs and will be adjusted against the final payout once that process concludes. Moneycontrol, which accessed a copy of the letter, reported the details in a report, noting that the clarification came after the DGCA reached out to Air India seeking details on its compensation plan.

As per the reports, DGCA’s request was prompted by concerns flagged by global aviation organisations, including the International Civil Aviation Organization (ICAO), and Indian civil society groups.

Legally Mandated Payouts Could Be Higher

Air India’s response also confirmed that the final compensation will be in line with the Montreal Convention (1999), a global aviation treaty that governs airline liability for international flights and is part of Indian law.

As per this treaty, airlines who are met with such a serious crash are mandatorily liable to pay up to 100,00 Special Drawing Rights (short for SDRs) per passenger. This is equivalent to roughly Rs 1.5 to 1.85 crore at the current exchange rates. The compensation is typically for death or bodily injury, irrespective fault behind the accident.

However, the final amount that each family would receive may vary since the treaty allows courts to consider many personal and financial factors such as age, occupation, and number of dependents for the victims.

Ex-gratia payments, like the one announced by Tata Sons, are not legally binding and are rolled out more as a gesture of goodwill. However, some legal experts cited by Moneycontrol have flagged some concerns that such interim payouts could potentially influence or complicate the final settlement process.

Total Insurance Liability Pegged at Over Rs 3,900 Crore

Outlook Money cited a report earlier highlighting the big-ticket insurance claim this aviating tragedy would ensure. A Bloomberg report noted that it could become one of the most expensive aviation insurance claims in Indian history with the total liability estimated to be around Rs 3,944 crore (about $475 million).

The claims would include approximately $125 million for the aircraft hull loss and around $350 million for liability claims related to the loss of life and most third-party damages.

Many insurers such as Tata AIG, Bajaj Allianz Life, ICICI Lombard, New India Assurance, and several public-sector insurers, LIC, etc., had policyholders who died in the Ahmedabad Air India Crash.

The bulk of the liability, however, is reinsured by some global players such as AIG, with Indian insurers retaining only a fraction of the risk.

What Should Families Expect

As Outlook Money reported earlier, families of Ahmedabad crash victims are entitled to many layers of compensation such as:

• Airline liability under Montreal Convention

• Ex-gratia compensation announced by Tata Sons

• Any personal travel or life insurance policies held by the victim

• Third-party liability for those who were killed or injured on the ground

Ahmedabad Air India Crash: On June 12, 2025, Air India’s London-bound Boeing 787 Dreamliner crashed shortly after its take-off from Sardar Vallabhbhai Patel International Airport. The AI 171 flight had crashed into residential quarters at the BJ Medical College campus in Meghaninagar, killing around 265 people, including 242 onboard and many others on the ground.

Passengers on this international flight were automatically covered under the airline’s passenger liability insurance which comes embedded into the ticket cost. Additionally, personal travel insurance plans, if purchased separately, offer further benefits such as emergency medical expenses, trip cancellations, or even baggage loss.