According to AI official spokesman, of the three categories of insurance cover for the airline for its aircraft fleet, legal insurance, and equipment, the payment of premium on aircraft insurance itself has gone down by Rs 10.79 crore in 1997-98 as compared to 1996-97.

While AI spent Rs 24.91 crore on aircraft premium in 1996-97, it registered a saving of Rs 6.20 crore due to a sharp decline on this front to Rs 18.71 crore in 1997-98. This is expected to decrease further in 1998-99.On the legal insurance cover, taken mainly on behalf of passengers, the airline managed to save Rs 8.22 crore as the payment of insurance premium nose-dived by nearly 50 per cent from Rs 15.63 crore in 1996-97 to just Rs 7.41 crore in 1997-98.

``Safety is of paramount importance in the airline industry and any expenditure on thisaccount should be considered as money well-spent especially as its implications extend to a far wider horizon,'' said general manager, air safety, Captain U C Saxena. And with an impressive safety record, AI has managed to achieve this siginficant cost reducation, especially at a time when desperate efforts are on to revive the airline.

``It's simple logic. Insurance companies offer reductions in premium if there are fewer claims, and greater adherence to safety regulations mean less accidents,'' Captain Saxena explained.

Hidden costs like damage to engine to due to rejected takeoff in bad weather, or even due to bird strikes have also proven the cost effectiveness of measures taken to prevent such incidents. On an average, uninsured and hidden costs exceed insured costs by a factor of 4:1. ``If we take the cost of a Boeing 747 engine as $5 mn, the impace on finances is a recurring expenditure of Rs two crore a year.