Air Deccan, India's first low-cost airline, created history on Wednesday by flying passengers to Delhi from Bangalore for a fare of only Rs 500, plus taxes (Rs 200).

The Airbus A320 has a capacity of 180 passengers, and almost 100 of them took the inaugural Bangalore-Delhi Air Deccan flight by paying just Rs 700.

From August 26, the Air Deccan's A320s will fly on the Bangalore-Delhi-Mumbai-Bangalore-Mumbai-Delhi-Bangalore route.

The budget airline offers 75 per cent of the seats at rates ranging between Rs 500 and Rs 5,000 and the remaining 25 per cent at around Rs 7,500, which was 25 per cent less than the normal fare of Rs 10,500 on any other airline, according to Air Deccan chief operating officer Capt. G R Gopinath. The new fare system devised by the airline is called Dynafares.

Passengers must book their tickets 90 days in advance of the date of flight for availing concessional fares. But if you want to buy Air Deccan's Rs 500 Delhi-Mumbai ticket, you will have to wait till August next year, as the tickets in this category have been sold out for a year even before the airline started its service in the sector.

Air Deccan, which is starting its Delhi-Mumbai service on August 26, had set aside about five seats per service in this category. The next category of tickets, priced at Rs 700, is also completely sold out for a year. In this category also, Air Deccan offers on an average five tickets per trip.

Capt Gopinath said that instead of the normal 140 seats on a regular Airbus A320, Air Deccan will have 180 seats (all in economy class).

The no-frills airline does not offer free meals or snacks. Passengers will have to pay for their food. There would also be inflight shopping. Passengers will have plush leather and can enjoy movies, etc on drop-down plasma television screens.

Air Deccan's entry in the busy Delhi-Mumbai sector is expected to kickstart a price war.

The airline plans to start services in the Bangalore-Delhi, Delhi-Mumbai and Mumbai-Chennai routes with two aircraft in the first phase. In the subsequent phases, the airline will put in more aircraft into the routes.

Air Deccan, which will be closing its first full year of operations this year, expects revenues of $125 million with a marginal net profit. In the last year, Air Deccan recorded revenues of about $25 million.

Airport employees walk past an Air Deccan Airbus A-320 aircraft before its flight to New Delhi at Bangalore Airport on Wednesday. Photo: Indranil Mukherjee/AFP/Getty Images