Air India is wants its share of the no-frills market

The new airline, as yet unnamed, is scheduled to make its debut in April next year with a fleet of 14 specially-leased Boeing aircraft.

It will fly from the Indian capital, New Delhi, as well as India's financial centre, Bombay, also known as Mumbai.

Air India said it hoped the new service would undercut its rivals by about 25%.

A spokesman said the budget airline plan now requires government backing, having won the approval of Air India's board last week.

Competition threat

Air India - the country's main international carrier - hopes the new service will help fend off growing competition on its lucrative routes to the Gulf states, where there is a large Indian expatriate community.

Many Indian expats in the region have recently switched to Gulf Traveller, a no-frills operation launched last year by Bahrain-based Gulf Air.

No frills air travel, pioneered by South West Airlines in the US and successfully introduced to Europe in the 1990s by Easyjet and Ryanair, is a relative newcomer to Asia.

Last year, Singapore Airlines set up a budget carrier, Tiger Airways, with a range of partners including Ryanair founder Tony Ryan.

In India, privately-owned Deccan Airlines offers cut-price travel on domestic routes in the south of the country.

India's state-owned domestic carrier, Indian Airlines, is also reported to be weighing up the launch of a no-frills subsidiary.