easyJet plc (LSE:EZJ) and British Airways plc (LSE:BAY) today announced that agreement has been reached on the terms under which easyJet will have an option to acquire British Airways` German subsidiary, DBA. DBA has a fleet of 16 Boeing 737-300s and carried more than three million passengers in the year to 31 March 2001.
- easyJet has signed heads of terms with British Airways under which easyJet will be granted an option to acquire DBA at any time up to 31 March 2003, extendable by easyJet to 3 July 2003.
- As consideration for the option, easyJet has committed to second three managers, contribute 5 million Euro for capital expenditure to assist DBA`s transition towards a low-cost airline model and has agreed to pay an additional 600,000 Euro per month until exercise of the option.
- If easyJet exercises the option, it will pay a further amount of between 30 million Euro and 39 million Euro to British Airways (depending on when it exercises the option).
- 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.
- The acquisition of DBA would immediately provide easyJet with a significant German network and the personnel, systems and infrastructure to support such an operation.
- In the financial year to 31 March 2001 DBA had a turnover of 344 million Euro (approximately £212 million) and carried more than three million passengers. DBA operates a scheduled service on seven German domestic routes. It operates 130 flights per day, has a fleet of 16 Boeing 737-300 aircraft and employs approximately 800 staff.
- easyJet and British Airways have committed to execute legally binding documentation giving effect to the heads of terms by 30 June 2002.
Ray Webster, Chief Executive of easyJet, said:
“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.
“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.
“In obtaining an option to acquire DBA, we have created the space we need to consider acquiring the airline outright. We will use the time granted to us through the option to ensure that the acquisition is well planned and is in the interests of our shareholders and the employees and customers of both organisations.”
Roger Maynard, Chairman of DBA, said:
“DBA`s future lies in the no-frills market and the approach by easyJet to acquire it is a real vote of confidence in DBA. DBA`s focus on the German domestic market means there is no longer a strategic rationale to retain DBA in the British Airways group. The deal will also enable us to continue to focus on full service operations. The decision to sell DBA is in line with British Airways` Future Size and Shape package of measures to reduce costs and return the overall business to profitability.”
Credit Suisse First Boston is acting as financial advisor to easyJet.