ALEXANDER CAMPBELL / LONDON
Low-cost carrier pays $546 million to become market leader - but "humbled" Ryanair vows to overtake enlarged rival
EasyJet is set to become the largest low-cost airline in Europe, following its £374 million ($546 million) cash deal for no-frills rival Go.
The purchase, from majority owner venture capital group 3i, values Go at £258 million, not including Go's £116 million cash. EasyJet will fund the take-over with a rights issue. The price is roughly 26 times Go's last after-tax profits.
Michael O'Leary, chief executive of rival Ryanair, says that he "will be taking lessons in humility now that we are Europe's second largest low-cost carrier", but vows Ryanair will become Europe's biggest scheduled carrier by 2010. Describing the acquisition as "ballsy", O'Leary says his company will still have significantly lower fares than EasyJet.
Among those to profit is Go's chief executive Barbara Cassani, whose stake is worth around £10 million. She opposed the deal, and will depart when it is complete. Go's chief operating officer Ed Winter will become Go's acting chief executive to oversee its absorption into EasyJet - a process EasyJet chief executive Ray Webster says will take some 18 months.
EasyJet hoped to announce the merger when it released its results earlier this month. The delays, Webster says, "all came back to people", although he denies Cassani's claims that Go managers opposed the merger.
EasyJet's EasyLand head office at Luton will not be big enough for the merged airline which will have London hubs at Gatwick, Luton and Stansted. Webster says it has not decided where its new headquarters will be. EasyJet will also be scrapping the Go brand.
With the cost of new employee compensation plans, the merger will cost around £25 million, but the airline should show net savings by its third year, says Webster.
EasyJet and Go have both been negotiating 75-80 aircraft orders with suppliers, to support ambitious growth plans and the talks will resume after the merger. Webster is reluctant to add destinations, saying: "It's unattractive to go into a new city and build the brand from scratch". He would rather use new aircraft to increase frequencies on existing routes and destinations.
Source: Flight International
