German carrier Lufthansa has announced it will create a new low-cost airline in 2013.

The move is designed to reduced costs and will see Lufthansa’s European short-haul and Germanwings flights merged together into the new brand.

The new, and as yet unnamed airline, will operate out of Lufthansa’s main hubs at Frankfurt and Munich.

The airline is expected to start service on January 1st 2013 and is expected to operate 90 aircraft and carry over 18 million passengers in its first year.

Lufthansa is Germany’s largest airline and carries over  100 million passengers a year.

Lufthansa shares rose in early trading today following the announcement late on Wednesday.