State-owned Indian Airlines, one of India's three main domestic carriers, has made its first annual profit in four years, helped by cost cuts and improved productivity, its chairman said on Friday.

The airline, which mainly competes with privately-owned Jet Airways and Air Sahara, said it had an audited net profit of 441.7 million rupees (USD$10 million) in the business year ended March 2004, which compared with a 1.97 billion rupee (USD$44.7 million) loss the previous year.

Indian Airlines had said in March it expected to post a net loss of 412.5 million rupees (USD$9.4 million).

The carrier, which is poised to place a $2.1 billion order for 43 Airbus planes, said operating revenues increased 13.37 percent in 2003/04 to 46.5 billion rupees (USD$1.06 billion), outpacing a 6.81 percent rise in operating expenses to 45.25 billion (USD$1.03 billion).

Chairman Sunil Arora told a news conference the turnaround was achieved by strict cost controls, despite a 5.5 percent increase in average fuel prices during the year, a rise in the number of passengers carried and better fleet utilization.

The airline, which had a domestic market share of 40.5 percent in 2003/04 to Jet's 42.9 percent, said it had saved 1.9 billion rupees in the year through early retirement schemes, rationalizing menus and better inventory control.

It said passenger traffic rose 5.5 percent while average plane loadings rose to 65.8 percent of capacity in 2003/04 from 64.6 percent the previous year.

Indian Airlines operates a fleet of 45 Airbus A320s, three A300s and two Dorniers.

India, Asia's fourth-largest economy and one of the world's fastest growing, has a small air travel market owing to steep fares inflated by high taxes on fuel and airport levies.

But the domestic air travel market is expected to see growth of nearly 10 percent a year for the next 20 years due to lower fares and rising incomes for millions of Indians.

(Reuters)