The Indian Airlines board on Friday approved a proposal to set up a wholly-owned subsidiary to undertake airport handling and allied services.

The IA board also decided to extend the duration of voluntary retirement scheme by two months beyond July 17, 2003, according to a press statement issued in New Delhi.

It said the IA board also constituted a committee to assess and finalise requirements of taking additional aircraft on lease for expanding operations.

The board was informed of the re-appointment of New India Assurance Ltd to manage IA's ensuing aircraft insurance renewals.

When contacted, airline sources said the subsidiary would provide ground-handling services to its own flights as well as those of other domestic and foreign carriers.

It would have an authorised capital of Rs 100 crore (Rs 1 billion) and a paid-up capital of Rs 10 crore (Rs 100 million), they said.

The subsidiary would enter into joint ventures with private parties for investment in upgrading infrastructure for providing world-class services.

IA earns Rs 120 crore (Rs 1.2 billion) annually from ground-handling services, which is expected to increase substantially after the formation of the joint venture.