March 20, 2012 / 6:43 AM / in 5 years

Air India to proceed with Dreamliner purchases

The Boeing 787 Dreamliner airplane is seen in Long Beach, California March 14, 2012.Lucy Nicholson

NEW DELHI (Reuters) - State-run Air India AIN.UL will push ahead with its purchase of 27 of Boeing Co's (BA.N) 787 Dreamliner aircraft, India's Aviation Minister Ajit Singh said on Tuesday, despite a heavy debt burden and a long-running dispute with the plane maker.

Air India, which has debts of $4 billion, is running on taxpayer life support and is yet to receive any planes from a $6 billion order for as many as 50 long-range jets from Boeing placed in 2005.

"It is a good plan for Air India," said Ajit Singh, confirming that the Dreamliner order still stands.

India's flagship-carrier has been hit by high fuel costs and cut-throat competition that has beset the country's aviation industry, in which only one of six airlines is currently profitable.

The cash-strapped airline, which owes about $500 million to oil companies and $240 million to airports, is currently negotiating for nearly $1 billion as compensation from Boeing for the delayed delivery.

Boeing has disputed the airline's claim that the plane maker has promised to pay $500 million in compensation. The more than three-year delay has disrupted Air India's plans and schedules, the carrier says.

Air India expects to take delivery of seven Boeing Dreamliners in the next fiscal year that starts in April, Chairman Rohit Nandan said this month.

Reporting by Anurag Kotoky; Writing by Henry Foy; Editing by Aradhana Aravindan

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