AIR FRANCE, the French national carrier, is considering transforming CityJet, its Irish subsidiary, into a low-cost carrier to service the short-haul European market.

Separately, FreshAer, an Irish start-up whose executive team includes Jim Duggan, a former chief pilot at Ryanair, has said it will begin operating flights from Dublin, Cork and Shannon on July 1.

This surge of activity in the low-fares, low-cost sector comes at a time when recession-hit international carriers have been forced to mothball thousands of aircraft in the Nevada desert.

It is understood that Air France is considering transferring 20 of its Boeing-737s to CityJet.

It is believed that the airline could then transform itself into a low-cost carrier in less than three months.

According to one industry source, CityJet, which is based in Dublin, could take up a number of slots at Paris’s Orly airport allocated to Air France earlier this month.

A more likely option, if City-Jet is transformed into a low-cost operator, would be to take up slots at the new terminal at Charles de Gaulle airport which is due to come on stream in June with capacity for 10m passengers per year.

The greatest impediment to transforming CityJet into a low-cost carrier is likely to be the stance adopted by French trade unions.

CityJet is not unionised but French unions, who are among the most militant in Europe, are unlikely to welcome the formation of a low-cost airline.

Under existing industrial agreements at Air France, City-Jet is only permitted to operate aircraft with capacity for up to 100 passengers. Industry sources said that a viable low-fares airline would have to operate aircraft with the capacity for about 150 passengers.

Meanwhile the new airline FreshAer, has said it will sign contracts to lease five Boeing-757s within two weeks to service the Irish market.

The company is currently attempting to raise £15.1m (€21.9m) through a private placement marketed through its website.

According to John Lepp, FreshAer’s communications manager, the airline will launch a €1.5m marketing campaign within the next four weeks.

With 4,838 seats it claims to have greater capacity than City-Jet or British Midland.

It is planning to offer flights from Dublin to Stansted and also from Dublin, Cork and Kerry to Birmingham and Manchester.

According to Lepp, it will also fly from Dublin to Spain, Rome and to European ski resorts.

Although FreshAer will fly on many of the same routes as Ryanair, offering fares which will start at €10, Lepp said it will not compete head-to-head with Europe’s most-profitable low-fares carrier.

According to Lepp, the company will operate on the Jet Blue model — a reference to the successful two-year-old American budget airline.

“We will be a low-cost airline, not a low-fares airline,” he said. “We are entering the market where Aer Lingus would like to find themselves in three years’ time.

“Ryanair are very good at offering you seats for as cheap as chips but they are not giving you the service.”

Michael O’Leary, the chief executive of €5.1 billion Ryanair, was unfazed at the prospect of increased competition.

“They are proposing to take on Europe’s lowest-cost airline in its home market. We’ll eat them alive. It (FreshAer) has about as much chance of success as Saddam has of coming back to power on a popular wave,” he said.