State-run Air-India will lease 14 Boeing aircraft to launch a no-frills airline that will slash passengers' fares by 25 per cent, an airline official said.

The low-cost airline, to begin operations from April 2005, will initially fly only to the Middle East and Southeast Asian countries and will have only economy class seating, an Air-India official said.

He said the state carrier would lease 14 Boeing 737-800s for one year starting from April, the new airline's expected start date. Financial terms of the deal were not immediately disclosed.

"It would have a different niche and sub-brand. We will in all probability call it Air-India Express," Aviation Minister Praful Patel said separately.

He said that the move was among measures needed to make Air-India competitive with foreign carriers.

Air-India, which decades ago enjoyed high ratings from consumers, has gradually lost its shine faced with slicker service from foreign competitors.

The low-cost airline will fly from the capital New Delhi, the financial hub Mumbai and the southern states of Tamil Nadu and Kerala.

The concept of a no-frills airline is relatively new to India, limited solely to a private carrier, Deccan Airlines, operating mainly in southern India.

"The future is the low-cost airline. It is the low-cost airline which is going to steal the show. I think the Air-India low-cost airline is a fantastic idea," said Subhash Goyal, a senior tourism industry official.

India's main domestic carrier, state-run Indian Airlines, has also been weighing the launch of a low-cost airline.

Air fares in India are high by global standards because the cost of aviation fuel is double to triple the price in the international market.

Government subsidies are focused on consumer-oriented fuels such as kerosene used in cooking.

-- AFP