easyJet/DBA deal is off!

[welshwonder]

easyjet has pulled out of the option to buy DBA

It was on CNBC europe squawkBOX this morning

B.A's shares expected to suffer

[Kerosene Kraut]

Very sad news indeed for dba. Wonder who could buy them now. They won't make it alone. Remains to be seen what Eazy does instead.

[fadec_primary_channel]

on the back of the announcement.

Kerosene, I think it has been written elsewhere on pprune that the Hapag LLoyd Express chairman has indicated their group has not ruled out the purchase of another low co?? We will have to sit and wait to see what happens to DBA

fpc:D

[JiveBomber]

Perhaps Easy wants the money for something else. MyTravel looks like a bargain at the moment. Does anybody know how much it would cost to buy them at 10p a share ?

[brabazon]

Surely easyJet should have realised that German labour laws would make things difficult - they haven't suddenly been introduced and did anyone think that LH wouldn't react?

A costly lesson for easyJet. So where next - France?

[kick the tires]

Embargoed until 07:00, 18 March 2003

easyJet Terminates Deutsche BA Option

easyJet today announced that it has terminated its option to acquire Deutsche BA (dba) from British Airways.


Ray Webster, easyJet Chief Executive, said:


When we acquired the option last year, we believed that it represented the most attractive way of securing a substantial presence in the German market. In early December 2002 we said that, although the option to acquire dba runs until early August, we intended to make the decision by the end of March in order to reduce the uncertainty that surrounds this decision.


Despite months of exceptionally hard work by staff at dba, British Airways and easyJet, there have been two insurmountable hurdles:


Firstly, the rigidity of German labour laws has made it impossible to get acceptance of easyJet conditions of employment from key staff groups, despite numerous attempts and different approaches.


Secondly, since we negotiated the option there has been a substantial deterioration in the financial performance of all airlines in the German market including dba. This is in large part due to the specific characteristics of the German market and in particular the highly aggressive pricing policies of Lufthansa.


It is disappointing that we have had to make this decision. However, we always made it clear that we would not compromise the easyJet business model.


We reaffirm that the order for 120 Airbus A319 aircraft has always excluded any aircraft needed in relation to the dba option and we remain committed to organic growth of 25 percent per annum. Germany remains the largest economy in the European Union and we are currently examining the best way to develop our German operation and the numerous other growth opportunities across Europe.

Notes

easyJet announced on 8 May 2002 that it had reached agreement with British Airways for an exclusive option to purchase dba. That option was formally acquired on 14 August 2002. As consideration for the option, easyJet contributed Euros 5 million for capital expenditure to assist dba's transition towards a low-cost airline model and agreed to pay an additional 600,000 Euros per month until exercise or termination of the option.


ENDS

[dwlpl]

At this moment MyTravel is capitalised at £58million, easyjet at £907million.

[unwiseowl]

MT has debts of c. £200 million

[Stockpicker]

I think EZY wanted the DBA slots, not so much the a/c assets, so MyTravel would be a lot less attractitve; need to see whether EZY come up with some other place to put all those shiny new Airbus planes ....

Note both easyJet and BA shares up 13% today, but it will just be because the oil price is falling through the floor on the war news.

[Goforfun]

So how much did easyJet pay to British Airways for the options? Last I heard £5m had been paid?

[Denti]

Easyjet payed so far 9 Million Euros for the option.

IMHO thats the best thing that could happen to dba, the easy-option contract was very strict and suffocated the company til now. I hope the new CEO of dba (Mark Wyatt) knows how to manage an airline, unlike the last CEO (Adrian Hunt).

[In trim]

Denti,

Not sure of the details, but I doubt DBA have been "suffocated" by the eJ option without gaining anything from it.....I am sure the management have gained a very good insight into the thinking and philosophies of a successful lca which may assist them for the future, whilst also introducing the workforce to some of the realities of the low-cost competition within Europe, and what is required to compete effectively.

Similarly, eJ have a very good (albeit expensive) insight into some of the issues regarding employment in Germant which, I am sure, will save them making costly mistakes in the future.

In trim.

[Zulu]

Presumably the £6m wasted by easyJet will come out of the £10m 'bonus' the fat cats are creaming off for themselves?

Oh silly me, there goes a herd of Tamworths flying past my window!

[bmibaby.com]

I'd be interested in seeing how easily flydba can effectively be turned into a no-frills-airline!
The fact is that the airline has low-density seating, still serves meals (I've been told!) and has difficult to work round union contracts.
I really don't think that EZY could've done what Ryanair is doing to buzz right now in reducing the high operating costs.