The ICA compensation to Caribjet, if confirmed by the London court, can deal a financial blow to Air India -- which is already reeling under a Rs 1,100 crore accumulated losses. Both Caribjet and Air India are keen for an out-of-court settlement instead of battling out in the court, sources say.

"No compensation has been awarded to Caribjet as of today. We are appealing against the Caribjet's claim," said Air India's director communications, J Bhargava. The International Court of Arbitration has decided against Air India's stance and now the compensation has to be finalised, Bhargava claims.

``Even we are asking for a compensation from Caribjet.Only the court will decide who wins,'' he thundered.

The Caribjet's claim pertains to Air India' sudden termination of a wet lease contract with it which resulted in a financial loss to Caribjet. Air India has claimed that due to safety violations by Caribjet, which has been corroborated by India's Director General of Civil Aviation (DGCA), it has spiked its lease contract. Air India had taken two Lockheeds and one Airbus 310 on lease from Caribjet in 1996.

The airline's legal team has returned recently from London and has to decide on its future strategy within the next 21 days. The revamped board of the airline, which met last week, has also given its green signal to appeal against the award given by the arbitrator.

The $ 80 million award against Air India could mean a financial collapse of the airline which has begged for a Rs 1200 crore salvage package from the Union government. A committee, headed by finance secretary Vijay Kelkar, is presently preparing a restructuring package for the chronicallysick airline. The committee will furnish its report within the next few days and the first tranche of bailout package is expected in the forthcoming budget.

The Caribjet award couldn't have come at a worse time for Air India. For the first half of current fiscal, Air India has already notched up a loss of over Rs 100 crore. It will end the current fiscal with a net loss of over Rs 300 crore. The public sector airline has been targeted for privatisation by the government but like other public sector units, no action has been taken on this front.