easyJet today announced that it has terminated its option to acquire Deutsche BA (`dba`) from British Airways.
Ray Webster, easyJet Chief Executive, said:
“When we acquired the option last year, we believed that it represented the most attractive way of securing a substantial presence in the German market. In early December 2002 we said that, although the option to acquire dba runs until early August, we intended to make the decision by the end of March in order to reduce the uncertainty that surrounds this decision.
“Despite months of exceptionally hard work by staff at dba, British Airways and easyJet, there have been two insurmountable hurdles:
“Firstly, the rigidity of German labour laws has made it impossible to get acceptance of easyJet conditions of employment from key staff groups, despite numerous attempts and different approaches.
“Secondly, since we negotiated the option there has been a substantial deterioration in the financial performance of all airlines in the German market including dba. This is in large part due to the specific characteristics of the German market and in particular the highly aggressive pricing policies of Lufthansa.
“It is disappointing that we have had to make this decision. However, we always made it clear that we would not compromise the easyJet business model.
“We reaffirm that the order for 120 Airbus A319 aircraft has always excluded any aircraft needed in relation to the dba option and we remain committed to organic growth of 25 percent per annum. Germany remains the largest economy in the European Union and we are currently examining the best way to develop our German operation and the numerous other growth opportunities across Europe.”
easyJet announced on 8 May 2002 that it had reached agreement with British Airways for an exclusive option to purchase dba. That option was formally acquired on 14 August 2002. As consideration for the option, easyJet contributed Euros 5 million for capital expenditure to assist dba`s transition towards a low-cost airline model and agreed to pay an additional 600,000 Euros per month until exercise or termination of the option.