Kingfisher-Deccan may get to carry forward losses
As the combined loss of the two airlines is estimated at Rs 2,000 crore, the move may come as a major boost to the merged entity.
By Nirbhay Kumar, TNN |
NEW DELHI: The merger of Vijay Mallya’s Kingfisher Airlines with low-cost leader Air Deccan may turn out to be much sweeter than anticipated as the government is likely to allow them to carry forward accumulated losses and set it off against future profits of the merged entity. As the combined loss of the two airlines is estimated at Rs 2,000 crore, the move may come as a major boost to the merged entity.
The facility to carry forward losses after merger was provided to Air India through a specific decision and the break is not available to domestic airlines now. The move could also help Jet Airways in case it decides to merge Air Sahara (now rebranded as JetLite) with itself.
The civil aviation ministry has urged the finance ministry to provide the carry-forward facility to all airlines by amending Section 72A of the Finance Act. After the Air India-Indian merger, the government allowed the merged entity to carry forward losses and unabsorbed depreciation through a specific decision applicable only to the state-owned carriers.
“We have proposed, in our Budget wishlist for 2008-09, extension of this benefit to private airlines also as high capital cost associated with airlines business affects private airlines as well,” an official in the ministry of civil aviation said.
“We have urged the finance ministry to amend the related act so that merging private airlines can be benefited by carrying forward their accumulated losses and unabsorbed depreciation,” he added.
Based on the recommendations of Accenture, Kingfisher would be merged with Air Deccan. The UB Group first acquired 26% stake in Air Deccan and picked up another 20% through an open offer which is mandatory under Sebi norms. The Vijay Mallya-owned Group may buy another 5% in the low-cost carrier, ultimately taking its stake to 51%. The Kingfisher-Deccan combine is one of the three big players in the Indian market, racing with the Air India-Indian and the Jet-Sahara combines.
Sources said civil aviation minister Praful Patel may meet finance minister P Chidambaram in the new year to push for liberalisation of the tax regime for Indian carriers so that the industry can improve its financial health. Apart from the tax break for mergers, a number of other proposals would also be taken up by the civil aviation ministry, it is learnt.
The facility to carry forward losses after merger was provided to Air India through a specific decision and the break is not available to domestic airlines now. The move could also help Jet Airways in case it decides to merge Air Sahara (now rebranded as JetLite) with itself.
The civil aviation ministry has urged the finance ministry to provide the carry-forward facility to all airlines by amending Section 72A of the Finance Act. After the Air India-Indian merger, the government allowed the merged entity to carry forward losses and unabsorbed depreciation through a specific decision applicable only to the state-owned carriers.
“We have proposed, in our Budget wishlist for 2008-09, extension of this benefit to private airlines also as high capital cost associated with airlines business affects private airlines as well,” an official in the ministry of civil aviation said.
“We have urged the finance ministry to amend the related act so that merging private airlines can be benefited by carrying forward their accumulated losses and unabsorbed depreciation,” he added.
Based on the recommendations of Accenture, Kingfisher would be merged with Air Deccan. The UB Group first acquired 26% stake in Air Deccan and picked up another 20% through an open offer which is mandatory under Sebi norms. The Vijay Mallya-owned Group may buy another 5% in the low-cost carrier, ultimately taking its stake to 51%. The Kingfisher-Deccan combine is one of the three big players in the Indian market, racing with the Air India-Indian and the Jet-Sahara combines.
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Sources said civil aviation minister Praful Patel may meet finance minister P Chidambaram in the new year to push for liberalisation of the tax regime for Indian carriers so that the industry can improve its financial health. Apart from the tax break for mergers, a number of other proposals would also be taken up by the civil aviation ministry, it is learnt.
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