EasyJet is considering legal action after being notified that its founder Sir Stelios Haji-Ioannou is setting up a rival airline called Fastjet.
In a statement EasyJet announced it was told of the new launch, and that it will act to protect its rights.
"easyJet plc announces that it has received notice from Sir Stelios Haji-Ioannou that he intends to set up an airline branded Fastjet and that a website has already been established," it said.
The budget airline added that it had a number of rights under its agreements with SIr Stelios and his easyGroup holding company and that if any of these are infringed, it "will take necessary action to protect the rights of easyJet and the interests of its shareholders".
Sir Stelios, who founded the airline and remains a non-executive director on its board, has alleged that easyJet breached the terms of a contract between the two parties, according to the airline.
easyJet said it "emphatically rejects" this and "continues to seek constructive dialogue with easyGroup and Sir Stelios".
The news comes just after the easyGroup founder withdrew his calls for an extraordinary general meeting in order to remove a member of the airline's board.
Sky's City editor Mark Kleinman spoke to shareholders not related to the founder's family and said they were furious about the news and were waiting find out details on Fastjet.
Commenting on the news, said the move had the potential to undermine easyJet's value.
"Clearly Stelios has been working on this new airline venture for some time and it suggests that war and acrimony are about to break out again between the two sides."
Sir Stelios and his family are the largest shareholders in easyJet with 38% ownership.
He has declined to comment on the new venture.
The Fastjet website only has the words "Fastjet.com by Stelios. Coming Soon!"