Indian Airlines, the country's largest domestic carrier, has ordered 43 aircraft from Airbus for $2.1bn (�1.48bn), despite predicting a third year of losses.

"Yesterday the board approved the purchase from Airbus of 43 aircraft for a total cost of 100.9bn rupees," Indian Airlines spokesman said.

Airbus will deliver 319, 320 and 321 models to the airline over the next five years to replace its aging Airbus 300s and Boeing 737s.

"Indian airlines desperately needs to replace its aircraft and got a quote before 11 September and another since then and it was about three to four millions dollars cheaper per aircraft," Tom Ballantyne of Orient Aviation Magazine told the BBC's World Business Report.

The aircraft order was announced just before Indian Airlines said it expects to post losses for the past year and for 2002/03, putting it in the red for the third consecutive year.

Last year, investors baulked at the Indian government's attempt to sell 25% of the carrier because of its mounting losses and ageing fleet.

Domestic rivals

Indian Airlines is renewing its fleet as domestic rival Jet Airways continues to make inroads into the market.

Privately owned Jet operates a 38 aircraft with an average age of about three years while Indian Airlines has 56 aircraft with an average age of 13 years.

As a consequence, passengers, especially business travellers, have been switching to Jet.

Indian Airlines now holds just over a 50% share of the domestic market while Jet, which was founded in 1992, has grabbed about 40%.

The aircraft order must still be approved by the Cabinet Committee on Economic Affairs and the Public Investment Board.

More losses expected

Meanwhile, Indian Airlines said it expects to report a loss of 2.51bn rupees (�36.1m) for the year ending 31 March, and forecast a loss of 989m rupees for the coming year.

Last year's loss was blamed on a rise in the cost of aviation fuel, a sharp jump in insurance costs and drop in ticket sales after the 11 September attacks in the US.

Insurance premiums more than tripled to 1.85bn rupees from 590m rupees the year before, it said.