Iberia Express will start flying in summer 2012 using Madrid Barajas airport as its hub and will have four A320 aircraft to start, increasing to 13 by the end of the year.
Earlier this week IAG CEO Willie Walsh told Marketing Week that the company had not ruled out launching a low cost airline but it had to make sense for the bottom line.
“We would launch low cost if it makes sense. We assess any opportunity to see if it will add value to the group.”
BA once owned the low cost carrier brand Go, which it sold to easyJet.
Rival EasyJet said there is plenty of opportunity for expansion in Europe when setting out its business strategy earlier this year.
The airline co-founder Stelios Haji-Ioannou recently said he will launch an airline called Fastjet, although there has been no further news.