The latest round of cuts will see fares to tourist destinations such as Rome, Bologna and Lisbon fall to £60 return and Milan to £50, including taxes.

Real Video: Robin Aitken reports on the escalating price war

The prices have been cut from Go's standard European air fare of £100 and will be available on Tuesdays, Wednesdays and Thursdays from tomorrow until 10 December.

BA says it can offer more destinations

The announcement comes just a day after Richard Branson's Virgin Atlantic airline declared a price war on BA, cutting its long-haul prices by 50%.

That move will see the pre-tax price of Virgin return flights to New York cut to £140 from £310 and flights to Hong Kong slashed to £279 from £569.

Those cuts were themselves a response to British Airways' cut-price offers made in association with newspapers, offering discounts of 50%.

Both offers are for a limited period.

Richard Branson: The consumer will be the victor

Mr Branson said: "We will never be beaten by BA on price and will always offer better quality.

"This is another war between Virgin and BA which proves that competition works and that the consumer is the ultimate victor."

The latest discounts from Go do not compete with Virgin Atlantic, which operates only long-haul flights, but the move will put pressure on Virgin Express, Richard Branson's European airline based in Brussels, as well as other no-frills European carriers such as Ryanair, Debonair and easyJet.

A spokeswoman for Go denied the cuts were a direct response to Virgin's recent discount offer.