Three white 787s trimmed with red and orange Air India colours were parked at the Boeing plant near Charleston, South Carolina and ready for delivery at the end of May. Delivery was held up for months while Air India and Boeing worked out a compensation settlement and waited for Indian government officials to approve it. Terms were not disclosed.

The Dreamliner was also at the heart of a recent Air India pilots' strike. In July, about 500 Air India pilots ended the almost two-month strike over exclusive rights to fly the Dreamliner.

The striking pilots had demanded that their colleagues from the former Indian Airlines, the domestic state-run carrier that merged with Air India, not be trained to fly Dreamliners because they worried it could hurt their own career prospects.

Boeing said Air India is the fifth airline in the world to take delivery of a 787 Dreamliner. The ailing airline has ordered 27 Dreamliners in all.

"I am sure Air India and their customers will be thrilled to experience the revolutionary features on the 787, an airplane that will be the key focus of the airline's turnaround plan," said Dinesh Keskar, senior vice president of Asia Pacific and India Sales for Boeing Commercial Airplane, in a statement.

The airplane delivered today was built in Everett, Washington and flown to South Carolina for delivery.

"The 787 will allow Air India AIN.UL to open new routes in a dynamic marketplace and provide the best in-flight experience for our passengers," said Rohit Nandan, Air India Chairman and Managing Director.

Made primarily of lightweight carbon fibre materials, the new 787 is lighter than standard aluminium widebody jets. It is the first mid-size airplane capable of flying long-range routes, enabling airlines to open new, non-stop routes preferred by the travelling public, Boeing said in a statement.

Air India's Dreamliner is equipped with 18 business class seats and 238 economy class seats. The airplane is scheduled to fly to New Delhi on Friday.

India, one of the fastest growing aviation markets in the world, offers tremendous growth opportunities to planemakers as more newly affluent Indians take to the skies. Boeing officials forecast passenger traffic to grow by 8.4 percent annually in South Asia, which includes India, and by 7 percent annually in China up to 2031.

Boeing Co raised its forecast for the Indian plane market earlier this month, saying the South Asian country would need 1,450 new aircraft worth $175 billion by 2031. "India will have the highest passenger traffic growth in the world, higher than even China's in the next 20 years," Keskar told reporters. (Reporting by Harriet McCloud; Editing by Patricia Kranz and Eric Walsh)

• A Permanent Economic Emergency