The French carrier said on Monday one-way "MiNi" fares would start at 49 euros including tax for the 40 percent of people who travel without checked baggage, about 20 euros less than the current cheapest economy ticket.

MiNi customers will not get frequent flyer points but will get the same onboard service as fellow travellers with "classic" economy tickets.

Air France-KLM has slipped into second place among European network airlines behind German rival Lufthansa (LHAG.DE) on most measures, and analysts have urged it to focus on executing a cost-cutting plan and improving operations.

The airline said it would offer one million tickets this year in the lower price bracket on 58 routes including its domestic service. The service went on sale on Monday for flights from Feb 6.

Short-haul operations will be grouped in three categories, each flying different aircraft - the Air France-branded network using Airbus (EAD.PA) A320-family jets, the Transavia low-cost subsidiary flying Boeing (BA.N) 737s, and a regional unit operating planes with fewer than 100 seats.

Air France's website went down during the day. Christian Boireau, executive vice president for French commercial operations said: "It (launch) is more successful than we expected".

The decision to introduce a leaner low-cost model echoes a trend among legacy carriers hit by the growth of budget rivals such as easyJet (EZJ.L) and Ryanair (RYA.I).

In October, Lufthansa transferred short-haul flights to its no-frills Germanwings brand.

Air France-KLM has been under mounting pressure to act as its long-haul operations, the traditional cash cow, have failed to make up for domestic and regional European losses.

It denied reports that a newly installed system of regional hubs in France, designed to cut costs and lure customers with earlier flights, had failed to attract passengers.

Franco-Dutch parent group Air France-KLM shares were up 3.0 percent at 7.8820 euros at 1540 GMT, buoyed also by the company's denial of a report it intended to bid for the rest of Italian carrier Alitalia. (Reporting by Cyril Altmeyer and Tim Hepher)

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