IAG’s board has approved the launch of Iberia’s new subsidiary airline – Iberia Express – which will operate part of Iberia’s short and medium haul network.

According to IAG, “the subsidiary is being established to compete effectively in the Spanish domestic and European market. Over time it will develop new markets and destinations and strengthen the Madrid hub, creating valuable new jobs for the Spanish economy.”

Iberia Express will start operations in the summer of 2012. In addition to direct traffic, Iberia Express will also provide transfer feed onto Iberia’s long haul network.

The subsidiary will have a single A320 fleet with four aircraft initially. The low-cost subsidiary will have 13 A320s by the end of 2012. All the aircraft will be sourced from Iberia’s existing fleet.

Iberia Express will have lower operating costs than Iberia’s loss-making short and medium haul business. The subsidiary will recruit new staff at market rates. It will have improved aircraft utilization. Maintenance and ground handling will initially be provided by Iberia.

According to IAG, “The creation of Iberia Express will not change the terms and conditions of existing Iberia employees and it will not modify the existing relationships with Vueling Airlines and Air Nostrum-Iberia Regional.”