Fares between Britain and Germany have been cut to £1 or less as a new no-frills airline and Ryanair try to win customers by outdoing each other on price.

Germanwings began selling tickets between London's Stansted airport and Cologne for £1 ($1.64), including all the taxes, on Wednesday morning.

But as soon as Ryanair heard about the fares it promptly cut the price of its own tickets between Stansted and Frankfurt Hahn to just 50 pence.

The airlines will actually lose money on each seat they sell because they are bearing the cost of the taxes themselves rather than charging passengers.

Popular flights

"Traditionally the no-frills airline have worked out that they can actually and rationally carry a passenger for just one pound, but only if all the marginal costs, anything from air passenger duty to the passenger service charge are actually added," said the Independent's travel editor Simon Calder.

"Typically a £1 fare becomes about 15 quid once all the extras are added."

As well as bearing the cost of extra charges, Germanwings has gone one step further by offering the low fares on all flights - including popular weekend trips.

The new no-frills airline is part-owned by Lufthansa.