British Airways said it would begin flying from Stansted Airport, establishing a presence at London's third bigges airport for the first time.
The move will also bring it into direct competition with Ryanair on leisure routes.
BA, owned by International Airlines Group, said that from May it would fly to Faro in Portugal, as well as Ibiza, Malaga and Palma in Spain, from £49 one way.
The full-service operator, which provides complimentary refreshments on flights, will compete directly on those routes with no-frills Ryanair, whose cheapest flights in May cost about £25 one way.
BA's move into secondary airport Stansted enters traditional budget carrier territory, a change from a wider trend of low cost airlines increasingly flying from a city's main airport and stealing market share from full-service airlines.
Stansted, 35 miles north of London, will become BA's fourth airport in the region. It already flies from London's Heathrow, Gatwick and City airports.
BA said the flights would be operated by its BA City Flyer subsidiary on two-cabin 98-seat Embraer jets which are usually based at London City.
Meanwhile, Ryanair has announced it is to open a new base at Nuremberg Airport in Germany from 1 November.
The low-cost airline will base one aircraft in Nuremberg and will fly five new routes from the airport.
