easyJet Soaring to New Heights

While airlines continue to struggle following September 11th attacks, easyJet, Europe`s second-largest, no-frills airline has bucked the trend. This week, the internet-based airline announced the possibility of 2 major acquisitions that would significantly expand their empire.

In November
of 2001, just 2 months after the attrocities of September 11th, easyJet
already saw a hefty increase in passenger numbers. Furthermore, they have recently reported a 1m profit
in the six months leading up to March.

Earlier this year, easyJet indicated that it would actively consider all possible opportunities for further expansion and true to their word, this week, easyJet announced
that an agreement had been reached providing them with an option to acquire British Airways` German subsidiary, DBA.

The German market presents significant growth opportunities for easyJet and the acquisition of DBA and its transformation into a low-cost airline may represent the most attractive option for easyJet to enter the German market.

Ray Webster, Chief Executive of easyJet commented: “Germany is the biggest domestic air market in Europe. But it is very 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. 
He added “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”.


easyJet have not yet committed to the decision and they are taking careful measures to ensure that they are fully prepared. By Ray Websters` own admission, taking on a German airline will be a massive challenge. An easyJet spokeswoman told ITN:  “We will be placing a team in Germany with DBA to see how this is possible. We have until May next year before we make any final decision”.

Only 3 days prior to these announcements, easyJet announced
that it was in negotiations with 3i Group plc regarding the possible acquisition of Go. The company said it was forced to make a statement to the London Stock Exchange when it became aware that news of the negotiations had been leaked.

Go was previously sold by British Airways
last year to venture capital group 3i Group, Go management and other investors for £110 million ($161 million).

easyJet have chosen a good time for such a move. Go have recently reported
a healthy turnover for the 1Q.

It has been reported that Go`s CEO, Barbara Cassani
, is not happy about the possible takeover.

The move comes just two weeks after easyJet`s founder, majority owner and chairman, Stelios Haji-Ioannou, said he would resign as chairman
from next year and made clear that he wanted to sell some more of his controlling stake.

Analysts` valuations of Go vary widely between £200m and £600m. An acquisition of this magnitude would represent quite a significant expansion. I asked an easyJet spokeswoman whether easyJet would be equipped to cope with such a large rate of growth. She commented: “easyJet have grown rapidly over the last 6 years since our launch, and intended to grow at a rate of 25% year on year. We will of course ensure that we are capable of managing any additional growth prior to making any decisions”.

The airline is also in talks with Boeing and Airbus over buying 75 new planes. The decision is likely to be deferred until the outcome of talks with Go.
easyJet are currently Europe`s second largest airline - after Ryanair. If these acquisitions go ahead, easyJet will be Europe`s largest low-cost carrier.

easyJet have certainly embarked upon an enormously ambitious programme. Only time will tell whether or not they have bitten off more than they can chew. The easyJet spokeswoman commented: “We have always said that we will consider new opportunities for growth and since September 11th a number of opportunities have arisen. Such as the growth out of Gatwick. We will of course gather all information before making any final decision in which we are confident”.

Although the deal was expected to be completed within a matter of days, there has been no confirmation of the acquisition and the travel world eagerly awaits.