Iberia, the Spanish national carrier, will create another airline in 2011 for short-haul (European) operation. This airline needs to act as a feeder airline to Iberia, which is currenlty discussing a merger with BA. 

Since the margins on short-haul traffic are very slim, and decreased even due to the economic downturn, this move of Iberia might be quite wise. Setting up a new airline, with new labor contracts, single type (newer) fleet and other efficiency focussed processes, prevents the need to change part of the current airline. 

As they did not choose to use Vueling (now fully integrated with Clickair) for this feeder traffic, my guess is that Iberia works on a distinctive business model other than just low-cost.

Read more here:  eTurboNews.