Britair
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British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 5:40 pm

British Airways said today (Wednesday) that it has signed a binding deal with easyJet for the sale of Deutsche BA (DBA), its subsidiary which flies exclusively in Germany.

Under the terms of the ‘heads of agreement’ deal British Airways is granting easyJet the option to buy 100 per cent of Deutsche BA, by March 31, 2003.

The deal is potentially worth between £18.3 million (30 million EUROS) and £28 million (46 million EUROS), dependent on when easyJet exercises the option.

During the nine month option period British Airways will retain full control of Deutsche BA.

Roger Maynard, British Airways’ Director of Alliances, Investments and Joint Ventures, and also Chairman of Deutsche BA, said: “Flying exclusively in the German market means there is no longer a strategic rationale to retain DBA in the British Airways group.

“The decision to sell the subsidiary is in line with our Future Size and Shape package of measures to reduce costs and return the shorthaul business to profitability.”

The move to sell DBA is a further step in British Airways’ strategy to improve the performance of its European shorthaul business. British Airways’ operations at Gatwick airport now focus primarily on point-to-point shorthaul routes and its four separate UK regional businesses are being combined into a single entity - British Airways CitiExpress.

Selling DBA is in line with the airline's strategy of selling non core assets such as its disposal two years ago of french subsidiary Air Liberte for £40 million, and Go for £110 million last year.

In consideration for the option easyJet has committed to place three managers with DBA, contribute £3 million (5 million EUROS) towards capital expenditure and pay British Airways £366,000 per month (600,000 EUROS) until it exercises its option.

There are no changes to Deutsche BA flights or schedules as a result of today’s announcement.
 
Andreas
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 5:45 pm

actually it is an option, that might lead to a trade sale...anyway I posted this about 2 hours ago!
Regards
Andreas
I know it's only VfB but I like it!
 
Britair
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 5:52 pm

oops sorry, didnt see your post. But hey, it's always good to have two sides - i posted BA's statement. Cheers  Smile
 
Andreas
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 6:08 pm

...and I posted reuters...not exactly two different sides *ggg*
I know it's only VfB but I like it!
 
voodoo
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 6:26 pm

Since this deal may now make Michael O'Leary reach for the Immodium and stock up on toilet paper for his office,
can we assume BA considers Ryanair a bigger threat than Easyjet since this makes Easyjet very strong in Germany at Ryanair's expense.

I write this after reading the Financial Times yesterday which really described Easyjet as being in the middle threatening both BA (business travel) and FJ (create a leisure market), or, alternately, getting squeezed by both. So there are some contradictions involved in this chess game.
` Yeaah! Baade 152! Trabi of the Sky! '
 
Guest

RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 6:48 pm

Hi, here is my opinion.

1/ BA have a debt of 6 billion pounds; they are desperate; they are making huge losses in Europe; why not sell DBA, it is probably not contributing anything to BA; BA saves itself heaps of money in the future, whilst also making some more money.

2/ BA chief Roddington has said he does not beleive a premium airline can also successfully run a no-frills airline simoultaneously (yes, I know about buzz and a few others, but how successful are they?-buzz has not been much of a success it would seem....)

3/ Easyjet saw a threat of being sidelined by Ryanair, until recently Europe's largest no-frills carrier; Ryanair is expanding aggressively now in other markets; Ezy must have got nervous; the best way to expand very rapidly without comprimising safety and prevent Ryanair (FR) from becoming a major headache is to acquire another similar sort of operation; by acquiring GO and DBA, Easy is reducing the threat from other carriers. How many no-frills airlines can Europe support?


4/ Comparisons with Ezy and Ryanair-one prefers to chase mainly the business traveller who would not normally consider low-cost airlines; the other is solely interested in offering the cheapest fare possible, but only flies mainly to secondary airports; Ezy's costs are 30% higher than Ryanair's

5/ Ezy and Go have already said that they are not competing directly with Ryanair, in terms of stretegy....they don't want to be the cheapest, but they want to bring some 'quality' to no-frills travel

6/ Ryanair say they are not worried by all this-their defence is that they have made MUCH higher profits than any other low-cost airline (and some major airlines) and that they have also recorded higher pax numbers, and have costs 30% below those of Ezy or Go. But I think they must be a little worried; the German consumer may prefer Easyjet, even if its fares are higher.

Cheers
 
Guest

RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 6:56 pm

As long as they keep the routes and the prizes they have now, I don't have a problem with that.
But who knows. sigh.
 
Britair
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 6:58 pm

I agree with you Capt.Picard, BA needs the cash and have been looking at selling DeutschBA/DBA for a while now, especially after the Germania deal fell through. I think it works well for all parties. Definately gives Ryanair and Lufthansa a run for their money!
 
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PW100
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 8:13 pm

Capt.Picard
Excellent comments.
Just want to add that by selling DBA to a low cost operator [Easyjet], DBA will be transformed to a low cost operator as well. DBA will be a much more effective competitor to LH than it was under the BA umbrella. This would hurt LH much more than BA...

PW100
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
 
airways
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 8:30 pm

What wages are payed now at DBA? Does the staff have to take massive pay cuts after the merger with EZY? I don't know anything about the labour costs of this two airlines, but it would be interesting to see how it looks.

Some years ago, EZY took over "TEA Switzerland", which then became easyJet Switzerland. It's still an independet company, registered in Switzerland, but fully owned by EZY UK. They have their own staff and aircrafts (HB registered).

Probably they did that, as Switzerland is not a member of the EU, therefor they woulnd't be able to transfer all the rights to a UK company. What do you think, will EZY follow the same strategy in Germany? It wouldn't shouldn't be a problem there to take over all the rights, as both, the UK and Germany are members of the EU.

Michael
http://airways.ch
 
airblue
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 8:44 pm

If the deal will take place, I see DBA (but I think it will lose it name and it will become Easyjet) follow the company strategy, so not only flights within Germany, but also linking all the main German cities to the classic Easyjet destinations like CDG, LTN, LGW, AMS, BRU, MAD, BCN, AGP, ATH...
That can be sure a big trouble for LH, cause different from Ryanair, Easyjet will fly on the same routes and the price competition is more hard.
From the other hand, I don't think this will affect Ryanair for their expansion plans in Germany.
As it was told before they have 30% costs less than Ezy and they have the cheapest fares.
MOL could still sleep blissful for long.....
 
donder10
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 9:02 pm

Didnt DBA have 320s on order or was it an option ,or is that wrong?
 
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AirIndia
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 9:10 pm

Watched the news on cnn, but i think it said that DBA was sold to Go for 110 mn, and which is now being bought by easyjet for about 400mn, actually, a bit confused. Am i right or wrong pls tell.
 
777236ER
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 10:25 pm

Capt Picard, BA is actually very liquid. This is a long-term decision, rather than an immediate cash problem.
Your bone's got a little machine
 
Guest

RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 10:57 pm

Yep, I agree 777236ER. But what I meant is that it all helps (financially); but yes, I think this was a strategic long-term decision.

In fact, DBA had only recently announced they were going to adopt a 'no-frills' strategy, they saw this as the only way to make a profit; I guess Ezy heard this, and saw an opportunity.

I would like to know something about the consumer behaviour in Germany; would the typical German prefer to find the cheapest tickets possible, and be prepared to sacrifice some 'quality' i.e. drive to an airport a long way from the city?

Or would they be prepared to pay more in order to fly Ezy flights from main airports?

Or is there no such thing as a 'typical' German traveller?

I ask because: Ryanair seems to be doing ok in Germany so far, even though they fly to secondary airports

Also, I heard that German leisure airlines (LTU etc.) have slightly more expensive tickets than the equivalent airline in the UK, as Germans want more comfort than cheap tickets.

Would be interesting to read your comments.....Cheers
 
donder10
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RE: British Airways Sells DeutscheBA To EasyJet

Wed May 08, 2002 11:29 pm

Airindia,
GO was sold by BA to a management buyout for 110 million and Easy are negioating to buy it for 400-450 million according to the press.
 
Guest

RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 12:09 am

I'm just afraid the prices will also rise when they get swallowed by Easyjet. The 35 € oneway + taxes are really good right now.
 
racko
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 12:19 am

" would like to know something about the consumer behaviour in Germany; would the typical German prefer to find the cheapest tickets possible, and be prepared to sacrifice some 'quality' i.e. drive to an airport a long way from the city?

Or would they be prepared to pay more in order to fly Ezy flights from main airports?

Or is there no such thing as a 'typical' German traveller?"


Well, i think most travellers would prefer paying maybe 20-30€ more for flying from Frankfurt instead of flying from Hahn. Of course there people, who would drive hundreds of kilometres for saving 5€, but they are a minority. Most of the Germans prefer comfortable over cheap (as long as the difference isn't too big)
 
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RayChuang
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 12:24 am

If EasyJet does buy Deutsche BA, it'll be VERY interesting to see if they can compete against DB's high-speed railroad system. Especially now that DB is starting to introduce 330 km/h (205 mph) trains.
 
DELTA777
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 12:30 am

What effect will this have on the US Airways- DBA partnership? I would hate to see US loose their only codeshare partner.

D E L T A 7 7 7
 
Britair
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 6:39 am

I know that the British Airways codeshares have ended already as well as the Executive Club and oneworld affiliations, I'm sure the USAirways codeshare is to finish (or has finished already)
 
Andreas
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 3:37 pm

ok, britair, your thread wins!

now, some thoughts from me:

1. why should easyjet kick up the prices??? that would be totally stupid..they are going for the no-frills market...higher prices would make one man very happy: Juergen Weber, CEO of LH, and nobody else, and I really don't think easyjet wants to make this man happy!

2. IF, and please remember, we are talking about a call option right now, that easyjet bought (and NOT DBA), if the deal takes place, then easyjet would be in a very good position to attack LH AND Ryanair, as they'd get the slots of DBA, and DBA uses only major airports in Germany (still FRA-BER is NOT one of them).
If they raise their prices significantly, they could as well leave the whole thing alone, so don't count on it.

3. It'll be a long time until the German highspeed railway is in working order...yesterday I had the "pleasure" to go by train from FRA to cologne, and again, as always obviously, 40 minutes late!!!

Still most large german cities are already connected by highspeed trains (ICE) and it did no harm to aviation!

4. I don't think there's "typical german consumer" if it comes to flying: If you need fast and reliable connections, as most business travellers such as myself do, you'll probably go for LH, it's convenient and they have a brilliant reputation (and well-deserved, too) to make connections really work. Now, this does not count at all for event flyers or once per year passengers...they'll go for the price only (talking about short-haul services only). easyjet would therefore be in a very good position to tackle the german market if they get the slots of DBA AND succeed in turning DBA around because currently, it's one of the worst-managed airlines in Europe. But easyjet obviously knows this, as the price for the options was to deliver management capacities (beside a minor cash consideration).

just my 2 cents, well more like 20 cents this time *ggg*

Andreas
I know it's only VfB but I like it!
 
LJ
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 6:26 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
 
Britair
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RE: British Airways Sells DeutscheBA To EasyJet

Thu May 09, 2002 11:39 pm

We have been told at BA that the reason the deal has been done this way (call option) is that EasyJet's first priority is to absorb Go and get that deal done, however didn't want to let the DBA deal slip, so has put some money down now, kinda like a deposit, giving EasyJet time to work on Go and BA time to sort out DBA for them.

Cheers  Smile

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