British Airways is planning to launch a subsidiary to operate short-haul flights at London's Gatwick Airport.

The unnamed airline would run alongside its parent company's long-haul operation at the West Sussex airport.

BA has suspended its domestic and European routes serving Gatwick during the coronavirus pandemic.

It sent an internal letter to staff, seen by the PA news agency, which read: "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," the airline said.

"This will help us to be both agile and competitive, allowing us to build a sustainable short-haul presence at Gatwick over time," it added.

The letter also warned employees that the airline's pay costs will "steeply increase" once the UK government's furlough scheme ends on September 30, which is "bad news".

IAG owns British Airways and the airline is usually IAG's most profitable carrier.

But it has fallen behind the group's Spanish units Iberia and Vueling as Britain steered through tougher and longer restrictions than Europe.

IAG itself has adopted a more cautious tone on recovery than its competitors.

In July, the company forecast summer capacity would rise to just 45% of pre-pandemic levels versus outlooks of 60% to 70% from Air France-KLM, EasyJet and Ryanair.