Seven out of 10 flights from Luton are operated by EasyJet

Now, which will be based at Luton Airport in Bedfordshire, will fly to Manchester, Hamburg, Jersey, Rome, Lisbon, Ibiza and Tenerife.

The airline hopes to offer around 650,000 seats in its first year.

Now said it would offer fixed fares according to destination and season.

For example, the cost of a ticket on Now to Rome between March and May will be �55 plus �5 departure tax.

The new airline will face stiff competition from established operators EasyJet and Ryanair.

"We at Luton are proud to have been at the forefront of the budget flying revolution for the last decade. Luton Airport managing director Paul Kehoe

The leading budget carriers have a firm grip on the lion's share of the market - together they carry more than 30m passengers a year.

EasyJet currently accounts for seven out of 10 flights through the airport.

The launch comes as a new survey shows budget airlines are outscoring charter carriers and scheduled service operators when it comes to satisfying passengers.

Luton Airport managing director Paul Kehoe said: "We at Luton are proud to have been at the forefront of the budget flying revolution for the last decade.

Headquarters at Luton

"Now again Luton is taking the UK lead by becoming a partner in the launch of a new concept in flying - second generation low cost."

Now has been given a �300,000 regional selective assistance grant from the East of England Development Agency to help with start-up costs and establish its headquarters at Luton.

The low-cost airline will using two Boeing 737 300s.

A third aircraft, which Now plans to add after three months, will enable it to fly to two more destinations - Valencia and Dusseldorf.