Malaysia's budget carrier AirAsia on Wednesday said it plans to open up a route to the northern Indian city of Amritsar by the end of next year.

"I am really limited by the planes and the earliest we can look at (it) is the third quarter of 2008," AirAsia chief executive Tony Fernandes was quoted as saying by the official Bernama news agency.

Fernandes said the budget carrier was permitted to fly to India under a bilateral agreement reached by New Delhi and Kuala Lumpur.

But it cannot operate flights between destinations within India without approval from the government in New Delhi, he said, ruling out alliances with Indian budget carriers to enter the lucrative market.

AirAsia bought 100 Airbus A320s in 2005-2006 to service its expanding short-haul operations in the region and in January signed contracts to buy 50 more, with an option for another 50.

AirAsia was launched as a budget carrier in December 2001 with just two aircraft. It now offers more than 100 flights to destinations in Cambodia, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.