Air India Ltd, which is already buying new planes to spruce up its fleet, plans to order another 60 aircraft to meet rising demand for air travel in the world's second-fastest growing economy.

Air India, which ordered 68 aircraft from Boeing Co last year, will prepare a proposal for the new purchases in two weeks, Aviation Minister Praful Patel said in New Delhi on July 29. The nation's biggest overseas carrier will evaluate aircraft from both Boeing and European rival Airbus SAS, he said.

State-run Air India, set to be merged with Indian Airlines Ltd, may need more planes as economic growth and rising incomes prompt more Indians to fly, said Bloomberg News. The carrier will have to face competition from Jet Airways (India) Ltd and Lufthansa AG, which are expanding in India.

"Looking at the demand and passenger growth, the number of new orders could be about 60," Air India's Chairman V. Thulasidas said. "In the next two to three years, we should be replacing all the old aircraft with new ones."

Mumbai-based Air India will also consider buying the Airbus A380, Patel said. Delivery from Boeing for the estimated US$10 billion order placed last year began in December.

"We will revisit the aircraft acquisition process of Air India within a fortnight," Patel said. "After all these new aircraft are inducted and the old ones phased out, Air India will need more aircraft."

Air India may sell shares next year to partly fund the purchase of the new planes, Patel said on May 22. Air India and Indian Airlines were planning to go for separate initial public offerings earlier, but the plan was delayed until the merger.

Air India will raise as much as 85 percent of loans for the new planes from the Export-Import Bank of the United States, according to the company's annual report for the financial year ended March 31, 2006. These loans are guaranteed by the government of India as Air India is a state-owned company. The remainder will be raised as loans from commercial banks.

Air India had foreign currency loans of 15.02 billion rupees (US$370 million) by March 31, 2006.

Purchase of the new planes may help Air India improve its profits, which declined to 149.4 million rupees in the year ended March 31, 2006 from 963.6 million a year earlier.

Air India and Indian Airlines have more than 110 planes in all and have ordered an additional 111 from Boeing and Airbus.

Air India ordered 50 Boeing planes for itself and 18 for its low-fare unit Air India Express in January 2006 to start flights to the United States and Canada.