Andreas
Topic Author
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Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 3:53 pm

On reuters this morning:

EasyJet takes option on BA's German unit

LONDON, May 8 (Reuters) - British budget airline easyJet Plc, in talks for several months to acquire rival carrier Go-Fly Ltd, surprised the market on Wednesday by announcing it had acquired an option to buy British Airways Plc's German unit.
EasyJet said the option on Deutsche BA could be
granted any time until March 31, 2003, and was extendable by easyJet to July 3.
If exercised it would pay between 30 and 39 million euros in addition to the cost of the option, which involves immediately committing management resources and five million euros in capital to the German carrier.
Europe's second-largest low-cost airline also said it had
posted a first-half pre-tax profit of one million pounds ($1.47 million) for the six months to the end of March, up from a 10.3 million pounds loss for the previous corresponding half.
EasyJet, which flagged last month it expected to post a
modest first-half profit, has a seasonal business and usually generating profits in the spring and summer months and in the past it has reported losses in the half-year to March 31.
EasyJet has been in talks for several months with former BA start-up Go's current owners -- 3i Group Plc, which owns 43 percent and speaks for more than 23 percent held by other investors, and Go management, which owns 22.5 percent.
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TriStar500
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RE: Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 3:59 pm

Interesting... I think it depends quite a bit, how flyDBA will be doing with the new low-fare concept they are trying out at the moment. If they fail, EZY might be a lot more reluctant to invest into the German market (and in flyDBA).

Just my 0.02 Euro.
Homer: Facts are meaningless. You could use facts to prove anything that's even remotely true!
 
racko
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RE: Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 4:16 pm

Easyjet is crazy...now we have easy virgin ba going

 
Udo
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RE: Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 4:26 pm

I would really love to see EZY buying flyDBA so that LH would have to face a strong competitor on domestic routes...and this time LH couldn't refer to the competitors' airports being far off as we often have heard...
Me & You & a Plane Named Blue...
 
voodoo
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RE: Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 6:14 pm

I first became suspicious when I heard a few weeks ago that DBA's new livery is going to be ....orange.
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GDB
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RE: Easyjet Opts To Buy Deutsche BA

Wed May 08, 2002 10:14 pm

BA management strike again, why not sell DBA to LH?
Think about it, LH would maybe pay top $ to keep a low-cost carrier off their turf.
 
Thomas_Jaeger
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 12:18 am

Lufthansa couldn't buy DBA as it is one of the only remaining independent airline offering scheduled flights in Germany. Lufthansa and Eurowings even had to give up routes such as Dortmund-Berlin, Dortmund-Stuttgart, Munster-Stuttgart, Paderborn-Stuttgart etc. as conditions to get the approval for Lufthansa to buy a stake in Eurowings. No way, Lufthansa could buy another German airline.
Swiss aviation news junkie living all over the place
 
donder10
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 12:22 am

The EU ''competition'' hawks would have shot it down immediately ,unfortunately.
 
Udo
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 2:31 am

These "competition" hawks don't just shoot anything down for fun, they try to keep the competition alive.
No competition means monopoly, monopoly means higher (and unfair) fares and people like you would be the first to scream about these rip off fares...but who knows, maybe you like spending more money on a domestic ticket than on a transatlantic ticket???


Regards
Udo
Me & You & a Plane Named Blue...
 
donder10
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 2:45 am

These "competition" hawks don't just shoot anything down for fun, they try to keep the competition alive.
If they try to keep the competition alive,why was Sabena never closed down?I wonder how much in subsidies it received.LH is rumoured not to make any money on its domestic routes so allowing LH to buy DBA could be seen as either consolidation or monopolising.
 
srbmod
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 3:02 am

This is quite a surprise, but it doesn't mean that Easyjet isn't still interested in buying Go. If they were to acquire both DBA and Go, they would be a formidable competitor in Europe. Perhaps Ryanair may get into the fold and make an offer for Go. Or maybe even Virgin Express might make a play for Go. Easyjet is looking to take on the big boys and could probably do quite well. By acquiring DBA, they get an instant mid-European hub that also links up quite well with Easyjet's current structure and with Easyjet Switzerland.
 
SQ325
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 3:11 am

EasyJet is continuing its shopping tour through the european low cost market. Ever DI is not a really low cost carrier.
I wonder if EasyJet is taking a bit to much on their bag. German domestic market is not easy.
A possible FR appareance in the domestic market could be difficult if DI will become a part of EasyJet.
 
Guest

RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 3:16 am

As long as they keep the good deals DBA currently has and keep the domestic network or even expand it this would be ok. But they need to keep the domestic network. We need it.
 
donder10
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 4:03 am

DBA are still a traditional carrier,so to speak,at the moment aren't they?
 
Andreas
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Dammit...I Just Kicked Up...

Thu May 09, 2002 3:48 pm

britairs thread on the same topic...so if anyone cares to read what I have to say about this...please read the other thread (*arrrrgh*!!!!).
just some things:
1. DBA changed to low-carrier at the beginning of this year.
2. DBA has a lot of valuable inner-German slots to and from MAJOR AIRPORTS (Hello Ryanair, read this!!!), that's what makes the deal interesting for easyjet.
3. LH would never ever buy DBA: it would never be allowed by the competition guards, and besides, what does DBA have to offer??
slots? ridiculous LH has more than enough slots in Germany.
profits? never ever, DBA is the worst-managed airline in Europe!!
So don't even consider this.

And again, one reminder: There is still NO DEAL on DBA, it's an option!!!

Regards
and don't drink too much today, fellow Germans! (to alle non-Germans: today is Father's day in Germany, and many guys just go out with their friends and drink themselves senseless)

Andreas
I know it's only VfB but I like it!
 
lmml 14/32
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 4:34 pm

I wonder how DBA's ops to MLA will be effected now. Will EasyJet be obliged to fly the MLA routes as planned for this summer? If not what will happen agents' bookings which are already confirmed? These can be transferred to AirMalta or Condor. It will be nice for AirMalta to increase flights to Germany.
 
Andreas
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LMML: Please Keep In Mind...

Thu May 09, 2002 6:09 pm

...that there is currently NO takeover of DBA by easyjet, so there will be no changes to the schedule. IF the takeover should take place in the nearer future, it would be extremely unwise to cancel any flights that are well booked.
Regards
Andreas
I know it's only VfB but I like it!
 
Guest

RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 6:47 pm

Andreas, you must realise that there is a difference in strategy between Ryanair and Easyjet (re: MAJOR AIRPORTS-hello Ryanair!!!).

Ryanair are simply not interested in major airports.

They have two goals, apart from making a profit: 1) Keep costs the lowest possible 2) Offer the cheapest fares possible (including free tickets)

To do this, Ryanair cannot afford to fly to major airports; the main reasons are 1) Cost 2) Congestion & delays, which jeapordise tight turnaround times

Ryanair is thus mainly focused on attracting the leisure traveller.

Easyjet's strategy is to chase after the business traveller, with flights to main airports, and high frequencies, but usually at a fraction of the cost of a flexible major airline ticket.

They have already said they are not interested in being the cheapest, thus are not directly competing with Ryanair's strategy.

At the moment, the figures suggest Ryanair's strategy is working much better; but this may change-the German consumer may not be as price sensitive as the UK one.

You take your pick, and fly your choice, but you cannot say that Ryanair, with the highest profits of any no-frills airline (and some major ones), and costs at least 30% below those of Easyjet or GO, are wrong to fly to secondary airports-obviously they have got something right.
 
donder10
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 7:48 pm

How much population is there around HHN?How many slots at FRA do DBA have ?
Cheers,Alex
 
LJ
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RE: Easyjet Opts To Buy Deutsche BA

Thu May 09, 2002 8:33 pm

Andreas, what's the point in buying this kind of call option if you don't intend to exercise it. The only reason EZY probably used the option route instead of an outright offer is that they expect the value of DI to decline and thus get DI cheaper during the period of the option (if the value of DI declines than they can make another offer which is lower than the curent one, if the value of DI rises they can always exercise the option and thus EZY is protected by any upturn in the value of EZY). I don't have any doubt (unless off course something really strange happens) that at one point EZY will exercise the option and thus make an offer for the airline. Why else invest EUR 5mio, committing 3 EZY managers to DI and pay EUR 600,000 a month to BA?

I only hope for EZY that they won't encounter the same problems after they took over TEA Switzerland a couple of years ago.

Regards
Laurens
 
racko
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RE: Easyjet Opts To Buy Deutsche BA

Fri May 10, 2002 12:50 am

"How much population is there around HHN?How many slots at FRA do DBA have ?"

HHN is in the Hunsrück, a spare populated area. Also the unemployment rate there after the USAF left the airport. There is not much other industry there.

DBA has no slots at FRA.
 
ryanair
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RE: Easyjet Opts To Buy Deutsche BA

Fri May 10, 2002 6:12 am

An option is just that, an option. I should imagine some banker somewhere came up with an idea to earn some commission and sold the deal to BA and Easyjet. Easyjet are suckers for that, they tend to do things simply because the possibility is there even if it makes little sense (like Easy Swiss).

For instance options can be used as a blocking tactic, should it seem likely DBA could go to someone they don;t want to see gain a foothold, they can step in. Don't read too much into it, although my guess is Easyjet will find it hard to resist (if it can find the cash).

The problem for Easyjet is with Stellios and his family reducing their shareholding to 49% it creates more supply of EJ shares. That means it will be more difficult for EJ to place shares and raise money that way.

Mind you a merged Easyjet-Go-DBA would be a fair force in European Aviation, with bases in Germany, Holland, France (when CDG comes on line), Switzerland, and the UK (particularly the key South East with major ops at Gatwick, Luton and Stansted).

That in it's self raises problems, such growth overnight would put serious pressures on the organisation, needing much inward looking when at this time maybe more outward looking would be best.
Easyjet should remember very few airline mergers ever recoup the investment and at this stage (with the market growing rapidly) it needs every penny it can get to invest to ensure the current EJ keeps up and not become distracted fixing other peoples mess (which I think DBA can be safely called).

Just my thoughts.
 
Andreas
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Hi And Thanx Everybody For Your 2 Cents...

Fri May 10, 2002 4:39 pm

..someday I'll be rich.
Just some remarks from me:

laurens: True! In this case I believe easyjet really wants to acquire DBA. They obviouslyneed more time for due diligence, which seems ok, as DBA is, as I said before, an economic desaster. So that strategy might prove to be the right one. btw: in more than 70% of all cases where options are bought, the underlying transaction does not take place, mostly because of the findings of the ongoing due diligence.

capt. picard: Sorry if I offended you personally, but that's a little misunderstanding. That remark about Ryanair was not meant seriously. I was referring to the discussion about Hahn being a part of Frankfurt or not and so on.
Anyway, I do not think you're right about Ryanairs strategy: I've heard several times that they are indeed aiming to get business travellers, too. It really doesn't make sense NOT to do that, as the German market is too small to break it up into several parts that can be covered by different carriers.
In the end it would be lovely to have a no-frills carrier flying the major airports, because as a passenger it is rather useless to look at the airfare alone, you have to take into account the fare to get to distant airports and the time you are losing just to do that, too.
If easyjet or any carrier manages to do that, then LH and Ryanair will have a serious competition problem.

ryanair: the truth in your remark about the success of mergers goes way beyond aviation industry, believe me!
as for DBA being a total mess: yes, that's why easyjet will bring in own managers right now in order to start reorganizing while doing due diligence. That's a somewhat new concept but it sure makes sense!

Regards to everybody

Andreas
I know it's only VfB but I like it!