Air Deccan has ordered 30 Airbus A320 planes in a $1.8bn (£931m) deal as India's first low-cost airline expands in the fast-growing domestic market.
The Indian market is thought to have a lot of potential
Air Deccan was set up last year and wants to lure travellers away from the railway network and pricier rivals.
The potential of the Indian market has attracted attention at home and abroad.
Beer magnate Vijay Mallya recently set up Kingfisher Airlines, while UK entrepreneur Richard Branson has said he is keen to start a local operation.
The country has a population of more than a billion people and many observers feel that it is underserved by airlines.
Recently however, the booming economy has boosted personal spending power and helped swell the middle classes and the corporate sector.
India's government has given its backing to cheaper and more accessible air travel.
"The days of flying being a symbol of only maharajas or the rich are over," the minister for civil aviation Praful Patel said earlier.
Infrastructure is being built to handle the expected increase in demand and on Tuesday, Agence France Presse reported that a group led by Germany's Siemens won the contract to build a private airport near Bangalore.
India's airports authority and the state government will own 13% each of the finished transport hub.
For its part, Air Deccan, set up by army officer and silk farmer Gorur Gopinath, plans to increase its fleet to 60 aircraft within five years.
To help finance the expansion the company may sell a 25% stake to an investor for about $50m.
When it was set up the firm offered tickets that were 50% cheaper than other Indian airlines. It said it was basing its business model on European firms such as Ireland's Ryanair.