EasyJet takes option to buy BA’s German airline

Wednesday, 08 May, 2002 0

EasyJet has taken an option to acquire BA’s loss-making German subsidiary Deutsche BA as part of its ambitions to dominate the European low cost airline sector.

British Airways said that it had signed a binding ‘heads of agreement’ deal with easyJet for the sale of Deutsche BA (DBA). Under the terms of the deal British Airways is granting easyJet the option to buy 100 per cent of Deutsche BA, by March 31, 2003.

BA said the deal is potentially worth between £18.3 million (30 million EUROS) and £28 million (46 million EUROS), dependent on when easyJet exercises the option.

During the nine month option period British Airways will retain full control of Deutsche BA.

British Airways said the move to sell DBA is a further step in British Airways’ strategy to improve the performance of its European shorthaul business. The airline’s operations at Gatwick airport now focus primarily on point-to-point shorthaul routes and its four separate UK regional businesses are being combined into a single entity – British Airways CitiExpress. The airline said that selling DBA is in line with the airline’s strategy of selling non-core assets such as its disposal two years ago of French subsidiary Air Liberte for £40 million and Go for £110 million.

Roger Maynard, British Airways’ Director of Alliances, Investments and Joint Ventures, and also Chairman of Deutsche BA, said: “Flying exclusively in the German market means there is no longer a strategic rationale to retain DBA in the British Airways group.

“The decision to sell the subsidiary is in line with British Airways’ Future Size and Shape package of measures to reduce costs and return the shorthaul business to profitability.”

There are no changes to Deutsche BA flights or schedules as a result of the announcement.

Ray Webster, Chief Executive Officer easyJet, said: “Germany is the biggest domestic air market in Europe. But it is poorly served by low-cost airlines, especially in comparison to the UK. We therefore believe that the German market has the potential to develop into a key European market for low cost airlines and we want to be part of that development. This arrangement gives us the opportunity to establish easyJet as the largest low-cost airline in Germany in one step and enhance our growth
opportunities.”