IndiGo, India's largest airline by number of passengers carried, is planning to form a subsidiary company to start regional operations.
Sources said IndiGo promoter Rahul Bhatia recently met aviation ministry officials to discuss his plans to set up a regional subsidiary that would connect smaller towns.
An IndiGo spokesperson, however, denied that any such move was underway.
Aviation ministry sources said that IndiGo planned to start a regional airline with 18-20 ATR (turbo-prop) aircraft.
The ministry is already formulating a policy wherein airlines would be required to operate a certain number aircraft to smaller towns to increase connectivity.
IndiGo moved European stock markets in January 2011 when it announced what turned out to be the biggest commercial aviation deal in history.
Topping an earlier plan to buy 100 planes with another 180 in the decade from 2015, IndiGo unveiled a shopping bag of $15.6 billion (Rs. 70,000 crore) to buy Airbus aircraft to become an international airline.