The Indian Airlines board on Friday approved the setting up of a committee that will look into the domestic carrier's plans of taking more aircraft on lease.

The decision comes even as the airlines is struggling to get its ambitious fleet acquisition programme off the ground.

The board also approved the setting up of a wholly-owned subsidiary for carrying out ground handling activities.

The decision to lease more aircraft has been taken after assessing the prevailing market conditions. According to Indian Airlines officials, the move is aimed at maintaining the marketshare of the airline, which needs to augment its fleet strength soon.

The Indian Airlines board had cleared the proposal of acquiring 43 aircraft in March 2002 on the grounds that a capacity increase was necessary due to stiff competition being faced by the airline from private players.

Officials said as the aircraft acquisition process had been considerably delayed it was necessary to adopt the leasing option. The committee is expected to give in its report at the earliest.

At present, the carrier has 13 aircraft on dry lease, which include eight Airbus A320s, four ATRs for its Northeast operations and one Airbus A-300. The airline is also expecting three Airbus A-320s on dry lease in the next two months.

The board on Friday also approved the setting up of a subsidiary to handle the airlines' ground handling activities.

The company will have an authorised capital of Rs 100 crore (Rs 1 billion) and a paid-up capital of Rs 10 crore (Rs 100 million).

The airlines is also scouting for a joint venture partner, which will hold a 49 per cent stake in the company, for the subsidiary.

The setting up of a ground-handling subsidiary by Indian Airlines comes after a cabinet committee on security decision in March 2003 to allow only Indian Airlines, Air-India and the Airports Authority of India to offer these services at airports. Indian Airlines already has a ground handling division, which has an annual earning of Rs 120 crore (Rs 1.2 billion).

The board has also extended the voluntary retirement scheme by two months, beyond its present expiry date of July 16.

The Indian Airlines board had cleared the VRS in March this year, after which nearly 100 employees had availed of the scheme.e board was also apprised of the re-appointment of New India Assurance to help the airlines manage its aircraft insurance renewals.