Air South West currently operates five flights a day from Newquay

BA said the year-round daily service will start on 20 March, with flights on a 150-seat Boeing 737.

Flights will depart from Gatwick at 1150 and return from Newquay at 1420.

British Airways, which dropped its "loss-making" service in 2003, said the increasing popularity of Cornwall had prompted the rethink.

Commercial director Robert Boyle said: "There is a growing demand for leisure travel to Cornwall, in part due to the popularity of attractions such as the Eden Project."

Airline 'surprised'

He added: "This new service will provide easy access to London and the South East for leisure and business travellers from the county."

The one round-trip daily service will be in direct competition with Air South West.

BA said one-way fares for flights between London Gatwick and Newquay would start at �35 including taxes, while Air South West's flights start at �38 including taxes.

Air South West, which took over the Gatwick service from BA in 2003, currently operates up to five flights a day from Plymouth to Gatwick via Newquay.

Malcolm Naylor, chief executive of Air South West, said BA's announcement on Monday came as "quite a surprise".

He said: "I think it's going to be an interesting competitive situation, but that's not unusual in this industry."

Tim Jones, chairman of the Devon and Cornwall Business Council, said: "To some extent we're surprised. They only pulled out four years ago.

"But it's certainly good news for Cornwall, but it will undoubtedly have an impact on Air South West who filled the slot."