The Hindu Business Line : AI board to meet today

THE Air India (AI) board is scheduled to meet in Mumbai on Saturday to discuss a variety of issues, including looking at the ground-handling subsidiary of the airline, the possible appointment of a consultant to advise on the outsourcing of its engineering services as also examining the option of leasing more aircraft.

The meeting assumes importance in view of the recent Budget proposals suggesting withholding tax on aircraft that are imported.

The Finance Minister, Mr P. Chidambaram, had proposed that any payment made by an Indian company to acquire an aircraft or an aircraft engine on lease from a foreign state or a foreign enterprise will not be exempt from tax. The exemptions will cease prospectively from September 1 this year.

The proposed move, if implemented, could affect the plans of AI to set up a low-cost airline. The airline has already announced that its newly christened low-cost airline, AI Express, is to be launched next year with leased aircraft.

Besides, even before the Budget proposals were announced, the airline had drawn up plans to lease more aircraft to expand its operations. Soon after the Budget was presented, AI sources had indicated that implementation of the proposals could put an additional financial burden of as much as $250,000 per month per aircraft on the airline.