Aug. 14 (Bloomberg) -- Air India Express, the low-fare unit of the nation's biggest overseas carrier, plans to start flights between domestic destinations from October to compete with Deccan Aviation Ltd. and SpiceJet Ltd. in a market that's forecast to be the world's fastest growing through 2025.

The unit of state-run Air India Ltd. will charge fares that are ``competitive and comparable'' with those of other budget carriers in India, Praful Patel, civil aviation minister, said in reply to a question in parliament today.

The start of domestic operations by Air India Express will intensify competition in a country where four budget carriers started flights in the past four years. Passenger traffic is forecast to grow 25 percent annually as economic growth and rising incomes encourage more people to fly.

``We plan to start operations from the winter of this year,'' S. Venkat, executive director in charge of finance at Air India, said in a telephone interview from Mumbai, where the airline is based. ``We want to offer seamless connectivity to our international passengers and also those who want to travel within India.''

Air India Express flies to 10 international destinations, including Dubai, Sharjah, Doha, Bahrain and Colombo, from 10 Indian cities, according to the airline's Web site.

Operations will commence with two Boeing 737-800 aircraft and the fleet will be expanded in phases, Venkat said.

Air India and its low-fare unit ordered 68 planes worth about $10 billion from Boeing Co. last year to start new routes and replace aging aircraft.

The number of passengers rose 24 percent to 73.4 million in the year ended March 31, 2006, according to India's civil aviation ministry. It probably grew to 86.8 million, including 60.9 million domestic passengers, in the year ended March 31, the ministry said.

To contact the reporter on this story: Santanu Choudhury in New Delhi at schoudhury5@bloomberg.net.

Last Updated: August 14, 2007 04:09 EDT