LONDON, UKBritish Airways is planning to launch a new low-cost subsidiary that will operate short-haul flights at Gatwick Airport to compete with Ryanair, Wizzair, and EasyJet.

It coincides with the ending of the government’s furlough scheme next month with new British Airways chief executive, Sean Doyle, hoping to cut costs to make the British flag carrier more competitive again.

But the move is likely to put the IAG-owned carrier on a collision course with unions due to the less generous contracts.

An internal letter to staff said: "This was previously a highly competitive market, but for us to run a sustainable airline in the current environment, we need a competitive operating model. Because of that, we are proposing a new operating subsidiary to run alongside our existing long-haul Gatwick operation, to serve short-haul routes to/from Gatwick from summer 2022. This will help us to be both agile and competitive, allowing us to build a sustainable short-haul presence at Gatwick over time."

The letter said that the "cautious approach of governments" has undermined customer confidence and means the recovery of air travel "remains far behind where we need it to be".

Employees were told that the airline's pay costs will "steeply increase" once the UK's furlough scheme ends on September 30, which is "bad news".

The message stated that BA's schedule and operating costs for the remainder of the year "will not line up".

It added: "We believe that this will be a temporary problem, but it's a serious one which we need to manage.