easyJet to buy GB Airways for ￡103.5 million
Tuesday, 30 October 2007: easyJet, the second biggest LCC in Europe, has just agreed to buy GB Airways for GBP103.5 million, and as such to add 15 more planes to their fleet, as well as secure a dominant position at Gatwick.
The purchase will be an all cash purchase from parent company Bland Group Ltd., with expectations of full consolidation by 2008/09.
“The deal will bring major benefits to both easyJet and GB Airways customers, delivering a wider choice of destinations at easyJet’s great prices, and creating clear value for our shareholders,” said Andy Harrison, easyJet CEO.
“This is an acquisition which both strengthens our customer offering at London Gatwick, our biggest base with an attractive catchment area, and allows us to fully capitalise on the potential of the airport through a larger number of slots.”
This acquisition sees the number of take off slots easyJet controls at Gatwick to 24%, up from the 17%. This also overtakes British Airways’ dominance at the airport.
“We expect the acquisition to be earnings positive in our current financial year and in the longer-term we will transition the GB Airways operation to easyJet’s cost base and operating margin levels. We expect to achieve both cost and revenue synergies as we expand our business at Gatwick,” adds Mr Harrison.
GB Airways operates under a franchise agreement with British Airways. And both the national carrier and easyJet have said that they will cooperate to ensure a smooth transferral of assets.
Due to these steps taken, GB Airways will continue to operate all its current routes under the British Airways brand until the 29th of March 2008. After which date all flights will then switch to operate under the easyJet brand.
In response, GB Airways CEO Kevin Hatton has said in a press release, “The sale agreement brings to an end a period of uncertainty about the future direction of our company.”
“We are pleased that the business and customer base built up by GB Airways will now be secured and strengthened under the ownership of the UK’s largest airline by passenger numbers, and one of the industry’s most powerful brands.We will fulfil our outstanding obligation as a franchise partner to British Airways and then look forward to a smooth operational merger with easyJet,” he concludes.
It is predicted that after the takeover, it is likely that easyJet will downsize GB Airways’ head office, and restructure the British Airways franchise setup to the current low-cost, no frills easyJet model.
easyJet expects GB Airways to produce a seat profit in its first year with the LCC, and currently has no plans to cut any of the services or destinations on the exisiting GB Airways network.
The carrier has announced that travellers currently booked on GB flights after the 29th of March are entitled to be rebooked onto easyJet flights or receive a refund.