In a deal three years in the making, the state-run airline Indian (formerly Indian Airlines) yesterday signed a firm order for 43 Airbus A320-family jets, marking the domestic carrier’s first fleet expansion in 15 years. Under the estimated $2.5 billion contract, deliveries will start in late October or early November and continue at a rate of one per month until March 2010.

All told, Indian will take 19 A319s, four A320s and 20 A321s. The carrier’s chairman, Vishwapati Trivedi, and Airbus vice president Kiran Rao signed the documents at a ceremony overseen by India’s prime minister, Manmohan Singh, and visiting French President Jacques Chirac. The Indian government issued its approval for the purchase last September, after Airbus reportedly lowered the price by around $75 million.

The deal will allow Indian to start retiring its aging fleet of Boeing 737s, in service in many cases for as long as 25 years. The airline hopes to fend off fierce competition from a rising tide of private low-fare operators, including Air Deccan, which in December agreed to start taking delivery of 30 A320s in 2008.