The Hindu Business Line : Budget likely to ease merger of private airlines

Flight path
Plan to extend benefit of carry-forward and set-off of accumulated losses and unabsorbed depreciation
Move will benefit merger of Jet Airways and Air Sahara, and Kingfisher Airlines’ buyout of Air Deccan

Ashwini Phadnis

New Delhi, Feb. 9 Budget 2008-09 may come up with fiscal measures to encourage consolidation among private players in the domestic aviation sector.

Indications are that the Government would make available the benefits of carry-forward and set-off of accumulated losses and unabsorbed depreciation to private-sector airline operators going in for a merger with other such entities.

At the moment, such a benefit is available to the amalgamation of one or more public-sector company/ companies engaged in aircraft operation with one or more public company/ companies in a similar business.

Official sources told Business Line that the Budget proposals are likely to extend the benefits of Section 72A of the Income-Tax Act to the merger of Jet Airways with Air Sahara and to Kingfisher Airlines’ buyout of Air Deccan.

The Finance Act 2007 extended the benefits of carry-forward and set-off of accumulated losses and unabsorbed depreciation available to amalgamation of one or more public-sector companies to facilitate the merger of Air India with Indian.

This was done by amending provisions 72A of the Income-Tax Act. Both Air India and Indian have accumulated losses on their balance sheets.

“Indications are that the Finance Ministry is positively inclined towards giving the I-T benefits extended to the merger of Air India and Indian to private-sector airlines,” a senior Government official said, indicating that if the proposal passes muster with the Finance Ministry, the merged private-sector airlines would be allowed to carry forward their losses.

The Finance Ministry, however, is unlikely to do away with service tax on first- and business-class international air travel and on fringe benefits like hotel accommodation provided to passengers in case of flight delays or cancellation, or free travel provided to airline employees.

Industry has been arguing that for free or concessional passages no tax should be imposed as these tickets are subject to availability of space on the aircraft and not when a paid passenger has to be flown.

Related Stories:
‘Air Deccan, Kingfisher merger may take time’

More Stories on : Airlines | Mergers & Acquisitions | Jet Airways (India) Ltd | Budget

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Budget likely to ease merger of private airlines

Auto MNC workers hit training circuit overseas

Cement prices inch up across markets

Niche segments lure IIFT students

Ford hopes to resolve pension, job security issues soon

Market lure: Insurance cos’ exposure to equities on the rise

TRAI may set FDI norms for broadcasting, cable services