Visa Air would become only the fourth airline to provide scheduled service within India, which offers huge potential because of its immense population, fast-growing middle class, vast size and difficulty of travelling between cities and tourist sites by any form of land transportation. An industry source said Mumbai-based Visa Air will operate a hub-and-spoke partnership with parent North Star Airlines, a New Delhi-based start-up which plans to begin operating in October.

North Star will fly major trunk routes such as Delhi-Bombay, Bombay-Madras and Bombay-Bangalore while Visa Air flies feeder routes such as Delhi-Lucknow, Jaipur-Jodhpur and Bombay-Pune, the industry source said. Mr Rajiv Jha, the chairman and managing director of North Star Aviation, the parent company of North Star Airlines, told Reuters that he was willing to discuss plans for North Star but responded by saying "no comment" when asked about Visa Air.

North Star is backed by 20 US-based Indians, who plan to invest $100 million initially to acquire six 150-seater aircraft, Mr Jha said. "We are negotiating with Boeing and Airbus for these aircraft, and expect to arrive at a decision soon on which aircraft to go in for," said Jha, a former pilot for state-run Indian Airlines. North Star Aviation is in the process of setting up infrastructure and hiring crew for North Star Airlines, he added.

Visa Air and North Star Airlines will face competition from three airlines already providing scheduled flight services within India, and from a host of charter operators. Privately-owned Jet Airways, with a fleet of 26 Boeing 737s, last year surpassed government-owned Indian Airlines to become the largest provider of domestic air service.