LONDON— British Airways said it is considering creating a new short-haul subsidiary at London’s Gatwick Airport as it and other big carriers look for ways to offset pandemic-induced declines in long-haul traffic.

The airline at the start of the pandemic halted its short-haul flying from Gatwick and shifted those flights to its base at London’s Heathrow Airport. Big carriers such as British Airways have typically relied on short-haul operations to feed traffic onto more profitable longer routes, which are expected to be the last segment of air travel to recover.

Creating a new unit could provide the airline an opportunity to lower its cost base and better compete in the intra-European market with the likes of discounters easyJet PLC and Ryanair Holdings PLC. Short-haul flying, led by summer leisure travel, is slowly returning in Europe after being stuck for months well below the recovery seen in U.S. domestic travel.

“There are still question marks over the extent of the recovery in business travel,” Alex Irving, an analyst at Bernstein in London, said. “The customer base longer term will have a higher percentage of leisure travellers than it used to, so it makes sense for BA to be architecting its operations to compete more for that traffic.”

A British Airways spokesman said the airline was in talks with its union over the new subsidiary but that the company wasn’t able to comment further while the process continues. Successful union discussions are key to whether the airline moves forward with the plan. In those negotiations, British Airways has warned that it may not be able to return to short-haul flying from Gatwick without the subsidiary and new agreements with crew, according to a person familiar with the talks.

BA is aiming to get the operation up and running in time for next summer and will be operate under the same British Airways brand, according to a summary of a letter to staff reviews by The Wall Street Journal.

British Airways appointed a new chief executive, Sean Doyle, last October, a month after Willie Walsh, the longtime boss of parent International Consolidated Airlines Group SA, retired from his post. Mr. Doyle had previously been CEO of British Airways sister company Aer Lingus.

Mr. Doyle’s predecessor had made Gatwick a focus amid intensifying competition from discounters like easyJet and Norwegian Air Shuttle AS A. With the collapse of holiday specialist Thomas Cook in late 2019, and the curtailing of Norwegian Air’s operations outside of Scandinavia in the wake of the pandemic, other airlines, such as low-cost operator Wizz Air Holdings PLC, are expanding at the airport south of London.

British Airways’ plan comes after Gatwick CEO Stewart Wingate criticized rules put in place at the beginning of the pandemic that allow airlines to retain takeoff and landing slots at airports even if they are not in use. British Airways has indicated that it doesn’t intend to restart flying there this summer, Mr. Wingate said over the weekend, adding that other carriers have expressed interest in purchasing those slots.

Meanwhile, Dublin-based Aer Lingus is establishing its own new long-haul operation out of Manchester, England, with flights to New York, Orlando and Barbados, filling the gap left by Thomas Cook’s bankruptcy there and putting it head-to-head with Virgin Atlantic Airways Ltd. Its flights to the U.S. have been postponed due to ongoing travel restrictions that prevent most U.K. and European citizens from entering the country.

Write to Benjamin Katz at ben.katz@wsj.com