International Airlines Group (IAG), the parent company of British Airways and Iberia, will launch a new subsidiary called Iberia Express from summer 2012 in a bid to boost margins on Spanish short- and medium-haul services. Iberia Express is being established to provide a more competitive offering in the Spanish domestic and European market amid rising challenges from the high-speed rail network and LCCs, notably Ryanair and easyJet, which both have bases at Madrid Barajas and Barcelona El Prat.

Ryanair and easyJet operate large and growing domestic and European networks, and have overtaken Iberia as the two largest operators of services between Europe and Spain. Iberia has found it a challenge to compete with these carriers in light of its high flight crew costs and lower productivity.

The LCC strategy is also part of efforts by IAG to reduce the carrier’s cost base and return Iberia to profitability.