The Directors present the 17th Annual Report along with the Audited
 Accounts of your Company for the year ended March 31, 2012.
 
 Operations
 
 Your Company''s operations during the year ended March 31, 2012 have
 resulted in:
 
                                                  (Rs. in million)
 
                                     Year ended         Year ended
                                     March              March
                                     31, 2012           31, 2011
 
 Gross Income                        58,239.08          64,955.62
 
 Earnings before financial            1,222.08          11,084.37
 charges, lease rentals,
 depreciation & amortization
 and taxes (EBITDAR)
 
 Less:
 
 Depreciation & Amortization          3,418.66           2,410.38
 
 Lease Rentals                        8,684.52           9,839.96
 
 Financial charges                   12,763.35          13,129.40
 
 Profit / (Loss) before taxes       (23,644.45)        (14,295.36)
 
 Provision for taxes                 11,180.85           4,933.85
 (including FBT)
 
 Net Profit / (Loss) from           (12,463.60)         (9,361.51)
 ordinary activities after tax
 
 Exceptional Item                    10,816.48             912.47
 
 Net Profit / (Loss) after tax      (23,280.08)        (10,273.98)
 
 Scheduled Airline Operations
 
 During the year under review, your Company recorded a domestic market
 share of 15.6% and carried more than 10.5 million passengers across
 both domestic and international sectors. Fleet size of aircraft used in
 scheduled operations stood at 55 aircraft at year end. Despite
 significant downsizing measures in the second half of the year, your
 Company operated over 110,000 flights in the year and maintained
 connectivity to key destinations in the country through the year,
 including under-serviced stations such as Dharamsala, Shimla, Kulu,
 Hubli and Kandla.
 
 During the first half of the year, your Company had been able to
 recover the Airbus A320 family aircraft in your Company''s fleet which
 were grounded in 2010-11 due to V2500 engine related issues. This
 reflected in strong operating performance for both the quarters of the
 first half of 2011-12. Your Company had also made public its intent to
 exit the low-cost model and to reconfigure aircraft along with a phased
 transition to the Full-Service model. Your Company has been able to
 partially progress on this plan.
 
 However, given the pressure on the cost front due to unabated increase
 of fuel prices, Rupee de-valuation, rising interest rate and continued
 downward pressure on yields, your Company decided to downsize
 operations starting November, 2011. Despite the operational downsizing,
 the cash losses continued, leading to discontinuation of services from
 IATA''s Billing and Settlement Plan (BSP). Despite the additional
 disadvantage created, your Company designed alternate means to sell and
 distribute inventory.
 
 As a part of the overall downsizing of operations during the year under
 review, your Company also temporarily shut down operations on its
 international network to contain operational losses.
 
 Your Company continues to maintain a member-elect status with the
 oneworld Alliance. The 15 to 18 month complex integration process was
 successfully near completion for the February 10, 2012 integration
 date. However, in light of priorities centered around your Company''s
 recapitalization efforts, the oneworld management team agreed with your
 Company to defer the joining date - a move that would give your Company
 more time to address the challenges. They agreed to work with your
 Company during this phase with an aim of setting a newjoining date.
 
 Your Company continued to focus on major cost control initiatives
 during the year to reduce distribution costs, implement fuel
 optimization systems and processes, improve aircraft utilization,
 optimize headcount and re-negotiate general contracts in order to
 enforce cost competitiveness, which is reflected in an improvement in
 the non-fuel EBITDA cost index.
 
 Your Company continued its focus on various marketing and commercial
 initiatives including tie-ups with corporate houses to get premium
 business and launch of the Business Mileage program targeted at Small
 Medium Enterprises (SME). During the year under review, your Company
 won the ''Best Indian Airline'' Award from Business Traveller Magazine -
 London, ''Best Airline for Business Travel within India'' and ''Best
 Airline for Leisure Travel within India'' from Conde NAST READER Travel
 Awards and ''Best Loyalty Innovation'' Award in the Judge''s Choice
 category at Loyalty Awards 2012 hosted by Flight Global.
 
 In view of operating losses incurred during the year, your Directors do
 not recommend payment of any dividend.
 
 Subsidiary
 
 The statement of your Company''s interest in its only subsidiary, Vitae
 India Spirits Limited, as at March 31, 2012, prepared in accordance
 with the provisions of Section 212(3) of the Companies Act, 1956 is
 attached to the Balance Sheet.
 
 Outlook
 
 Your Company had successfully established itself as one of India''s
 largest domestic carriers by passengers flown and cities served over
 the last decade. Your Company has long enjoyed market leadership with a
 wide network reach in India, an awarded frequent flyer program and wide
 distribution. Due to the current situation, your Company is operating
 as a holding pattern with limited operation, pending policy changes
 which are in the offing.
 
 The Indian airline industry is currently exposed to one of the toughest
 operating environments and is expected to struggle with profitability
 pressures, with one of the highest prices for Jet Fuel across the world
 given tax structure, recent depreciation of the rupee, and the high
 cost of borrowing. The Government of India is in the process to usher
 in fiscal measures and reforms that will make the operating environment
 more conducive for profitable business, viz.
 
 - Approved direct import of jet fuel by airlines.
 
 - Allowed External Commercial Borrowings (ECB) to the extent of USD 1
 billion to be used as working capital.
 
 - Opened the international market to private carriers by taking away
 the right of first refusal from the national carrier.
 
 - In the process of modifying the Foreign Direct Investment (FDI)
 policy that will allow foreign airlines to invest in Indian carriers.
 
 Your Company will undertake a phased and pragmatic approach to
 re-induction of capacity as well as further market expansion. The focus
 will be on maximizing the nascent potential of the domestic Indian
 market and capitalizing on strategic international routes.
 
 Your Company will continue to closely monitor key market trends as well
 as macro-economic environment in the Country from a global perspective
 linked to the recovery plan.
 
 Optionally Convertible Debentures
 
 Loans / Inter Corporate Deposits from certain business associates
 aggregating to Rs.7,093 million were converted into 70,931,985 8%
 Optionally Convertible Debentures of Rs.100/- each (OCDs) which were
 convertible into equity shares within a period of 18 months from their
 issue, after which they were redeemable.
 
 During the year under review, your Company, on February 18, 2012,
 allotted 79,868,051 Equity Shares of Rs. 10/- each of your Company
 pursuant to the conversion of 19,975,000 OCDs of Rs 100/- each.
 
 Subsequent upon the said allotment of equity shares as mentioned above,
 United Breweries (Holdings) Limited (UBHL) along with its subsidiaries
 holds 47.89% of the paid-up share capital of your Company and therefore
 your Company ceases to be a subsidiary of UBHL.
 
 Subsequent to the year under review, your Company further allotted to
 the then holders of the OCDs pursuant to the exercise of the conversion
 option by them:
 
 1.  35,642,361 Equity Shares of Rs. 10/- each of your Company, pursuant
 to the conversion of 8,422,290 OCDs of Rs 100/- each on April 10, 2012.
 
 2.  62,160,364 Equity Shares of Rs. 10/- each of your Company, pursuant
 to the conversion of 14,427,421 OCDs of Rs 100/- each on April 24,
 2012.
 
 3.  133,272,991 Equity Shares of Rs. 10/- each of your Company,
 pursuant to the conversion of 28,107,274 OCDs of Rs 100/- each on June
 23, 2012.
 
 As on date, all the OCDs have been converted into equity shares.
 
 Capital
 
 During the year under review, your Company''s Authorised Share Capital
 remained unchanged at Rs. 42,500,000,000/- comprising of 1,650,000,000
 Equity Shares of Rs. 10/- each and 2,600,000,000 Preference Shares of
 Rs. 10/- each.
 
 During the year under review, the Issued, Subscribed and Paid-up Share
 Capital of your Company has increased from Rs. 10,508,792,230/- divided
 into 497,779,223 Equity Shares of Rs. 10/- each and 553,100,000 8%
 Cumulative Redeemable Preference Shares of Rs. 10/- each to Rs.
 11,307,472,740/- divided into 577,647,274 Equity Shares of Rs. 10/-
 each and 553,100,000 8% Cumulative Redeemable Preference Shares of Rs.
 10/- each.
 
 Subsequent to the year under review, the Issued, Subscribed and Paid-up
 Share Capital of your Company has increased to Rs. 13,618,229,900/-
 divided into 808,722,990 Equity Shares of Rs. 10/- each and 553,100,000
 8% Cumulative Redeemable Preference Shares of Rs. 10/- each.
 
 Depository System
 
 The trading in the equity shares of your Company is under compulsory
 dematerialization mode. As of date, equity shares representing 99.91%
 of the equity share capital are in dematerialized form. As the
 depository system offers numerous advantages, members are requested to
 take advantage of the same and avail of the facility of
 dematerialization of your Company''s shares.
 
 Auditors'' Report
 
 As regards observations in para 4 of Auditors'' Report, the Statutory
 Auditors have qualified their report with a remark that the receipt of
 subsidy from aircraft manufacturers should be recognized as income on
 an systematic basis over the period necessary to match them with
 related costs which they are intended to compensate though the
 accounting treatment does not appear to be covered by the Accounting
 Standard (AS)-19 (Accounting for Leases) issued by the Institute of
 Chartered Accountants of India. In the opinion of the Directors:
 
 (1) The lessor of the Aircraft is a person other than the Aircraft
 manufacturer and the lease contract is independent of the contract with
 Aircraft manufacturer.
 
 (2) The termination, if any, of the lease contract does not in any
 event breach the conditions for the grant of subsidy by the Aircraft
 manufacturer.
 
 (3) The subsidy value, referred to in Para 4 of the Audit Report have
 been received by your Company during the 15 months period ended June
 30, 2006. As per Section 28 (iv) of the Income Tax Act, 1961, and
 precedents available under Income Tax laws, including pronouncements of
 the Apex Court, the revenue arising out of support packages will be
 treated as income for taxation purposes and therefore, it would not be
 prudent for your Company to treat the said revenues differently in the
 books of Accounts and for taxation purposes.
 
 (4) In the event of non compliance of the contract with the Aircraft
 manufacturer, the resultant possibility of recovery of subsidy granted
 by the Aircraft manufacturer has been disclosed as contingent liability
 and this accounting treatment adopted by your Company is also based on
 the well established principle of differentiation of revenue receipt
 and capital receipt.
 
 In view of the above, in the opinion of your Company, the accounting
 treatment of the support package received from the Aircraft
 manufacturer, as Income in the year of accrual and receipt is in order.
 
 The fair market value of these Aircraft is not easily ascertainable due
 to the unique specifications of the Aircraft. Therefore, the management
 has obtained the valuation report for Aircraft of similar type from a
 leasing company to ascertain the fair market value which is higher than
 the sale price of these Aircraft. This is also supported by the fact
 that the insurance value to be covered as per respective Lease
 Agreements is much more than the sale value of the Aircraft.
 
 As regards the observations in para 5 of the Auditors'' Report, your
 Company has adopted the Exposure draft on Accounting Standard - 10
 (Revised) ''Tangible Fixed Assets'' which allows such costs on major
 repairs and maintenance incurred to be amortized over the incremental
 life of the asset. Your Company has extended the same treatment to
 costs incurred on major repairs and maintenance for engines pertaining
 to aircrafts acquired on Operating Lease.
 
 As regards the observations in paras 8, 9 & 10 of the Auditors'' Report,
 the note numbers 36(b), 39 & 52 to Notes to Financial Statements are
 self explanatory.
 
 As regards the observations in the Annexure to the Auditors'' Report,
 your Company has taken / is taking necessary steps to ensure
 improvement in certain procedures and also compliance with relevant
 laws.
 
 Directors
 
 Mr. A. K. Ravi Nedungadi, Director, retires by rotation and, being
 eligible, offers himself for re-appointment.
 
 During the year under review, the following Directors resigned from the
 Board of Directors of your Company:
 
 1.  Diwan Arun Nanda - with effect from
 
 September 5, 2011
 
 2.  Mr. Piyush Mankad - with effect from
 
 January 9, 2012
 
 3.  Mr. Ghyanendra Nath Bajpai - with effect from
 
 January 9, 2012
 
 4.  Mr. Vjay Amritraj - with effect from
 
 March 14, 2012
 
 5.  Mr. Anil Kumar Ganguly - with effect from
 
 March 17, 2012
 
 Subsequent to the year under review, Mr. Manmohan Singh Kapur was
 appointed as an Additional Director with effect from April 24, 2012 and
 holds office up to the date of the ensuing Annual General Meeting of
 your Company. Notice in writing has been received from a Member
 signifying intention to propose the appointment of Mr. Manmohan Singh
 Kapur as a Director of your Company at the ensuing Annual General
 Meeting.
 
 Auditors
 
 M/s. B. K. Ramadhyani & Co., your Company''s Auditors have confirmed
 that they are eligible for re-appointment at the ensuing Annual General
 Meeting and it is proposed to re-appoint them and to fix their
 remuneration.
 
 Listing of Shares of Your Company
 
 All the equity shares of your Company are listed on the Bombay Stock
 Exchange Limited and The National Stock Exchange of India Limited. The
 listing fee for the year 2012-13 has been paid to these Stock
 Exchanges.
 
 Corporate Governance
 
 A report on Corporate Governance is annexed separately as part of this
 Report along with a certificate of compliance from a Company Secretary
 in practice. Necessary requirements of obtaining certifications/
 declarations in terms of Clause 49 have been complied with.
 
 Management Discussion and Analysis
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, the Management Discussion and Analysis Report is annexed and
 forms an integral part of the Annual Report.
 
 Human Resources
 
 Employee relations remained cordial. The information as are required to
 be provided in terms of Section 217(2A) of the Companies Act, 1956 read
 with the amended Companies (Particulars of Employees) Rules, 1975, have
 been included as an annexure to this Report.
 
 Employee Stock Option Plan (ESOP)
 
 Your Company had approved ESOP 2011 at the last Annual General Meeting
 of your Company held on September 28, 2011.  As on date, your Company
 has not granted any option under ESOP 2011.
 
 Disclosures as required by Clause 12 of the SEBI (Employee Stock Option
 Scheme and Employee Stock Purchase Scheme), Guidelines 1999 are annexed
 to this Report.
 
 Conservation of Energy, Research and Development, Technology
 Absorption, Foreign Exchange Earnings and Outgo
 
 The particulars as prescribed under section 217(1)(e) of the Companies
 Act, 1956 and the rules framed there under are not applicable to your
 Company.
 
 The relevant information relating to Foreign Exchange Earning and Outgo
 appears in the Note No. 31(a) to (e) to the Financial Statements.
 
 Directors'' Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, in relation to
 the Financial Statements of your Company for the year ended March 31,
 2012, the Board of Directors reports that:
 
 - in the preparation of the Accounts for the year ended March 31, 2012,
 the applicable accounting standards have been followed along with
 proper explanation relating to material departures;
 
 - accounting policies have been selected and applied consistently and
 that the judgments and estimates made are reasonable and prudent so as
 to give a true and fair view of the state of affairs of your Company as
 at March 31, 2012 and of the Loss of your Company for the year ended
 March 31, 2012;
 
 - proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of your Company and
 for preventing and detecting fraud and other irregularities;
 
 - the accounts for the year ended March 31, 2012, have been prepared on
 a going concern basis.
 
 Thank You
 
 Your Directors place on record their sincere appreciation for the
 continued support from shareholders, customers, the Government of India
 especially the Ministry of Civil Aviation and the Directorate General
 of Civil Aviation, the various State Governments, Airports Authority of
 India, the Reserve Bank of India, lending banks and financial
 institutions, suppliers, other business associates and employees.
 
                       For and on Behalf of the Board of Directors
 
 Mumbai                                            Dr. Vjay Mallya
 
 August 10, 2012                      Chairman & Managing Director