EasyJet becomes Europe's largest low-cost airline

EasyJet is about to become Europe's largest low-cost airline following the announcement of a deal to take over its smaller rival, Go-Fly. EasyJet and Go yesterday signed a preliminary agreement, which will see EasyJet taking over the entire share capital of Go for $546.4m (£374m sterling). Part of the deal will be financed through the issue of new shares worth £76.7m, EasyJet announced.

According to analysts, the agreed price for the acquisition is very low. In 2001, Go had profits of £17m and its sales increased by 46%. Until last year, Go belonged to British Airways but was then taken over by 3i in a £110m management buy-out last year.

Go-Fly shareholders will be called upon to approve the deal in an Extraordinary General Meeting on June 17. Shareholders are expected to give the green light to the deal, as they will make a good profit from the takeover. Barbara Cassani, Go's American chief executive, who holds a four per cent stake in the airline, will be the biggest financial winner of this deal, as she will become a millionaire overnight. In a statement, EasyJet Managing Director Ray Webster said the takeover of Go by EasyJet would lead to the creation of the strongest low-cost airline in Europe and ensure that the business of low-cost flights continues to thrive.

The deal with Go-Fly, as well a recent deal struck between EasyJet and Deutsche BA, the German subsidiary of British Airways, which gives EasyJet the option to buy the company by the end of March 2003, will double EasyJet's fleet.

EasyJet is already holding negotiations with Airbus and Boeing aimed at buying 75 new aircraft. In an effort to lure from other airlines more customers on its short-haul European flights, EasyJet plans to increase its fleet capacity by 25% a year until 2004. Its plans also include the acquisition of more aircraft by 2007. In the six-months to the end of March, EasyJet had made a profit of £10m compared with a loss in the previous semester. Its income increased by 36% to £194m.

The founder and holder of a majority stake in EasyJet, Stelios Hadjiioannou last month announced that he would step down as chairman of the company. His successor will be Sir Colin Chandler, chairman of Vickers Defence Systems. At the same time, Mr. Hadjiioannou said he planned to sell a large chunk of his stake in the company he founded six years ago. He will continue to preside over other companies of the Easy-"Empire" such as the Easy Internet cafes, Easyeverything and Easyrentacar.

To date, low-cost airlines have captured 10% of the market in Europe, putting pressure on their traditional rivals. The airlines have already announced incredibly cheap flights for this summer, which are sometimes as low as $22.

Translated from Phileleftheros