easyJet to buy Deutsche BA?

[Few Cloudy]

Seems to be having talks with a few people about getting bought - any news?

[Zulu]

LONDON (FT Investor) - EasyJet, the UK-based budget airline, reported its first interim profit on Wednesday and said it had acquired an option to buy British Airways' German subsidiary, Deutsche BA.

The news comes just days after EasyJet said it was in talks to buy fellow budget airline Go, and could see easyJet taking over Deutsche BA at any point between now and March 31, 2003. It can also extend the option to purchase the German unit until July 3, 2003.

In exchange, easyJet will commit management staff to Deutsche BA, pay €5m in capital expenditure - to help the unit's transition to a low-cost airline model - as well as another €600,000 per month until it exercises the option.

If easyJet does decide to go ahead with the deal, it will pay a further €30-39m to BA, depending on when it makes the purchase.

EasyJet - which also posted a £1m first-half profit, compared with losses of £10.3m last year - said the option to buy Deutsche BA was possibly its best chance to enter the German market, which it sees as underdeveloped.

"Germany is the biggest domestic air market in Europe. But it is very poorly served by low-cost airlines, especially in comparison to the UK.

"We therefore believe that the German market has the potential to develop into a key European market for low-cost airlines and we want to be part of that development," said Ray Webster, chief executive.

[Robert Vesco]

Just heard on SWR3 (German radio station) that easyJet have bought Deutsche BA and will become the larges low fares carrier in Germany.

[railwaysengineer]

DI just reduced their fares drastically (more than once I got TXL-CGN-TXL roundtrip for EUR 95,39, that´s much less than ST with their new shuttle, who are presently at EUR 154,00 for the same route). There is movement for the pax, good prices are opening markets, thats good for your industrie !!!

[VIKING9]

The next news will be that EZY have gone bust cos' they ain't got any money left after buying up the world :rolleyes:

[mjenkinsblackdog]

May be it will Ba itself next.New low cost worldwide airline.:cool:

[aidybennett]

If Easyjet keeps buys Go and other companies, isn't setting itself up to NOT be a low cost carrier. I mean, if it gets bigger, surely it's going to end up with the same problems and costs that a large carrier has, result no low fares!
:confused:

[Zulu]

I almost feel sorry for Ryanair....

First pushed off the number one spot by easyGo, now the nail in the coffin for their Air Force Base, sorry Frankfurt hub, which was already struggling.

Like I say, almost...

[Anti-ice]

Well if Stelios is still involved, he'll just pop over to Athens and borrow another few hundred million £'s like he did last year to prop everything up:rolleyes:

[Lucifer]

http://news.bbc.co.uk/hi/english/business/newsid_1974000/1974405.stm

[unwiseowl]

I thought convetional wisdom was that you can't turn a "normal" airline into a low cost one and that you have to start from scratch?

[brabazon]

More importantly can easyJet impose their culture and systems on the likes of go and Deutsche BA - any employees of either airline wish to comment - how do you feel about giving up your brand identity and going "orange"?

[twinjet]

Bloody heck!!!
All this money to buy out airlines and so little money to offer in a payrise to the pilots!!!!! Whoever is in easy acquisitions and mergers had better watch out because my chief training captain said" we must attack costs" and hes going to be very angry when he finds out about this!!!

[733driver]

OK, so here is the opinion of a Deutsche BA pilot...

most of us are actually quite happy about the whole thing.

I am pleased it´s not Ryanair buying DBA. Their introduction in the german market was solely based on price, media and courtroom war against Lufthansa.

Plus, I hear lot less people complaining about Easy then Ryanair, both customers and employees.

I hope the newly formed EasyJet group (including GO and DBA) will be the SWA of Europe cause I don´t think Ryanair even comes close to Soutwest´s approach !

I wouldn´t worry to much about the risk of the investment. Considering the purchase price and the value of an established german domestic network with lot of hard to get slots at all major german airports (except FRA) , what a bargain for EasyJet!

Plus: DBA is known for it´s high standard in its flight operations. Thanks in part to regular BA audits to BA standards.

This will significantly help EasyJet to establish themselves in the German market. Let´s not forget: Until today most of the Germans have never even heard of EasyJet but DBA is pretty well known being the second largest scheduled operator here in Germany.

As for giving up the brand identity: DBA never was much of an own brand. It was allways closely linked to BA, just look at the colour scheme of the planes. On the other hand I don´t think anyone in BA ever considered DBA part of BA. So it was allways a little strange, really! So I don´t think we have a lot to lose giving up our own branding which was about to be changed anyway.

This brings me to the next point. DBA was allready in a transition towards becoming a low fares airline as I had written on PPRune in March. I don´t think anybody cared back then.

Furthermore, it´s important to point out that DBA allways has been a low cost airline compared to it´s competitor. It employs only around 800 people including some 200 pilots and 300 flight attendants but carries more than 3 million passengers each year.

So there shouldn´t be a problem controlling costs. Plus, if you consider how much less we get paid...

In conclusion: I think it´s THE oportunity for EasyJet to break into the german market at a VERY low cost and it could be a bright and orange future for us at DBA.;)

[kimmeke]

So GO is going to buy easy jet, easy jt wants Deutche BA, Richard Branson is looking into easy jet as well, JMC and Thomas cook belgium might operate together in the future,....


What is happening too the low cost market. Within a few years we will have one big low cost carrier or what?

[Orangewing]

mjenkins blackdog

Are you speculating or do you know something we dont.

[brabazon]

kimmeke

I think you've misread the post, it's easyJet who are buying up both go and Deutsche BA. Virgin Express wants to do a deal with easyJet rather than buy them out.

[noflare]

Why would anyone want to buy a company that has not made a penny profit since its inception and operates almost exclusively on german domestic routes, please someone explain how/why that would benefit easyjet ?

I fully understand him goin after GO, but DBA ?:confused:

[FlyingIrishman]

Don't you lot be too quick giving up Ryanair!!
Exactly the same options of buying Go and DBA were open to MOL but when evaluated, he figured cost bases were too high and that, quote: "I'm not interested in buying someone else's mistake!".

Ryanair ARE the leading low fares airline and are in the best position to start price wars. The competition will be in for a rough ride. If easyJet pull through with one or even both deals, they'll be left with no cash reserves and up to their eyebrows in debt and the price war that WILL follow, will hit them where it hurts.
Quite possibly they'll get more than they bargained for!

[noflare]

"Someone elses mistake"
Thats just what we have come to expect from that ignorant t*rd

Id say Easy & GO will make a pretty formidable airline, good luck to them, its time MOL was given a run for his money :mad:

[AJ]

Can we stop the seemingly endless bickering re Ezy vs Ryanair? (Or perhaps Ryanair vs Pprune?)

If you don't like Ryanair's style, that's fine, but stop dragging up the negative connotations and look at what's happening in an OBJECTIVE light-forget the prejudices.

From the looks of it, Ryanair opt for the more aggressive approach in keeping costs down-secondary airports, special airport concessions, and so on. They are also focused on providing absolutely cheap fares.

Ezy prefer to woo the BA/Lufthansa traveller, with convenient airports and regular flights-however, this means their costs are 30% higher than those of Ryanair, and profits are much smaller.

In the end, their (Ezy's) success will depend on managing to woo more of those passengers who are prepared to fork out more for a no-frills ticket-their prices are cheap relative only to the flag carriers, certainly not Ryanair.

Interesting analysis here (http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT31OY6OW0D&live=true)

In my opinion, Ezy are taking a bit of a gamble....but good luck to them in any case, it's great news for the consumer!

Cheers

[733driver]

Let me say a few things:

DBA is not a publicaly traded company, its only shareholder is BA so DBA never had to publish their financial results and never did (they only talked about turnover and making some loss).

Don´t forget, a lot of the money that was claimed a loss in DBAs results went directly back to BA! (all ground handling, SWORD plans... !)

Plus, there have been times where it might have made perfectly good sence to have a subsidiary in Germany that is making a loss. Just think of taxes and all the options you have when you can move money between two companies.

Additionally, maybe it was OK for BA in the past to pay a certain price just to make Lufthansas and Star Alliances life a little harder. Now there is no more One World airline in Germany!

And, did you know that DBAs loss was somewhere in the region of only 10 or 20 mio euros last year, which is less than BA was loosing in a day or two after 9/11?

And for those who doupt Easy can afford the deal: The purchase price is the equivallent of ONE new 737: 35-49 mio euros, depending on when they actually buy. GO is said to be arround 10 to 15 times more expensive.

Oh, and why they should buy a german domestic airline? Ryanair has allready indicated it plans to open more bases in Germany and start domestic services next year. That´s why! Would give them a great headstart.

Don´t you guys only think UK! Germany is a big domestic market with lot´s of money to be made.

And, who ever said that DBA wouldn´t be flying to Ezys european destinations from Germany?

[In trim]

The DBA thing makes a lot of sense. The purchase price is very cheap for an established operation......as long as EZY are convinced they can turn that loss into a profit!

The DBA staff I presume are aware that something like this was inevitable. BA don't want them, the cost of shutting down the operation is too high (especially in the German labour market), so BA are inevitably going to look for a buyer.

There are a few fundamental areas in terms of scheduling, aircraft utilisation, and eventual link-ups with other stations on the EZY (and Go!) network which would immediately bring synergies to the combined operation.

EZY were obviously looking at the German market, and this is a logical way in.....and the terms of the option are such that they can have a good look at the DBA operation, decide whether it could be adapted to the eJ low-cost model (which will need the buy-in of the staff) before making a decision. Not a bad 'try before you buy' option!

In trim.

[PAXboy]

Should background be needed:
Pax and long time user of easyJet since inception (they live in my back yeard and I am under the flightpath!)

Have used GO twice and DBA - once!

Have lived and worked in Munich, for a company that was German run but owned by a British company. So I saw the kind of conflicts that can occur.

When I lived in MUC, I only had cause to use DBA once, on a trip to LGW for a trade conference in Brighton. I thought the cabin service the worst I have ever had. When disembarking, other pax were discussing how bad it was and someone said that LOT were better! A relative who used DBA to visit me had the same opinion.

But easyJet should be very (x 9) careful. As has been stated elsewhere in this thread, buying a company has many social and cultural difficulties.

A case in point is VEX. I recall (but stand to be corrected and to apologise) that Sir Richard is on record as saying that, having only ever started business', he had not realised the problems in taking over another company and trying to change their culture. He said that he would not do the same again.

Also, consider BA. Consider them from Private Company (BA + BEA). Then think how they changed when nationalised. Then think of them as a plc and think how much their culture changed again.

Yes, of course, numerous aspects would have changed, but the core and soul of the company?

I have been in telecommunications for over 20 years and seen the GPO become BT and have several changes of 'strategic direction' and I know how much it has changed ... :rolleyes:

Taking over GO is not such a problem as they share the same culture. Taking over a foreign company, that probably has unions involved???? If they are German unions - then Stelios and the mgmt of easyJet have to have some good ideas.

I think that it is very bad timing. Buying one company is one thing but buying two at the same time is more than double the trouble. I realise that it might well have been an opportunity that they could not miss out on.

As DBA was a wholly owned subsidiary it was stated that their books have been closed. Now easy will be able to inspect those books in the Due Diligence phase of the purchase. If the numbers do not match what was told to them - they can pull out.

To close, it has also been said that some in DBA felt that they were very much 'the poor cousin' with no one in BA really wanting to own them. They might - now - be really pleased to be part of a company that wants to own them!

[MAVERICK 1]

Just a couple of points/questions

I have recently seen DBA in LHR on a regular basis.

Does anyone know if DBA were codesharing using BA slots into LHR or do the slots belong to DBA?

If they belong to DBA EZY will obviously get the slots into LHR which in its self would open up a new can of worms!

Then again I fail to see how EZY could possibly apply low cost principles to LHR especially turn-around times not to mention operating costs, so would EZY want them?

I would have thought the slots belong to BA and DBA are operating in there on a codeshare but if anyone could shed any light on that I would be interested to know!

[733driver]

To answer Maverick 1 s question first:

No, DBA does not hold any slots at LHR!

We had been operating flights from cologne (CGN) to LHR as a BA wetlease (BA925-930) last year. Since the winter schedule BA are operating this flights with 737, A319/20/21, 757 and 767.

So I don´t think LHR will be part of the strategy!

Refering to PAXboys post:

I am sorry to hear that you felt our cabin crews service was the worst you have ever experienced! I admit that most of our crew is usually dealing with german passengers as this is our core business. MUC-LGW was the only scheduled service to the UK other than the above mentioned wetlease. I am not surprised to learn that some of our cabin crew might not have lived up to the expectations, considering it was a BA codeshare flight! I think language difficulties might be the main reason here.

On the other hand many awards in the past have shown that DBA has allways been felt to be better in customer service than Lufthansa for example. DBA has a pretty good reputation amongst german travellers compared to its german competitors! Check past issues of CAPITAL magazine for reference if you wish!

I am convinced that your rather unpleasent experience was really the exception to the rule!

And as far as unions are concerned:

Yes, we are represented by the german ALPA , and we are currently in talks about a new paydeal, but we are not only paid a lot les than EZY pilots but also paid less than most other german pilots flying 737s. Just for reference.: Lufthansa Cityline pays approx. 30% more than DBA! And they are flying CRJs and Avros...

[Zulu]

Flying Irishman - only a fool would write off Ryanair, I'm no fool, and I certainly don't. A bit of competition can help concetrate minds though!
Your undoubted commercial ruthlessness would stand in you good stead for a price war, c.f. the DUB - EDI/GLA 'spat'.
However, as the low cost market matures, I believe people will start to look beyond just price, and at other market differentiators.
Also, how would Ryanair expand at an equivalent rate? You're taking delivery of (approx.) one airframe a month.
So this year, that's ~25% growth, next year ~22%, the year after 20% and so on...
Without taking over other companies, you fall behind in terms of market share.
So who's to say Ryanair won't take over someone, simply to gain size, and then apply the business model to the new airline?
Who's right? Who knows?
It will certainly be interesting times ahead!
BTW...Ryanair has been uncommonly quiet this last week...are you guys REALLY not worried about the Easy global expansion? I've heard a (pretty wild, even for PPrune!) rumour you were going to make a move on Buzz, flood STN with 737s and force Go out before Eazy move in!

[mjenkinsblackdog]

ORANGEWING.
Just a little joke laddie.:cool:

[PAXboy]

733driver, Many thanks for the information.

The cabin service was lacklustre but I was more irritated that the catering was a simple filled bread roll - but the price I paid was the same for BA into LHR when we got a much more comprehensive plate!!! Sorry, I should have made that clear in my post, as it had nothing to do with your colleagues in the cabin.

With language - not really. I used LH on over 40 sectors and did not have a problem. I will not, however, say that LH cabin service is the best ...

I am glad to hear that you may well be in line for a pay rise. I am hopeful that the entry of EZY into Germany will place a firecracker under LH. WIthin the last week, I have seen a statement by LH CEO to the effect that he is not worried about low-cost carriers. Ha! Let's see how long it takes him to change his tune!

All the best for the years ahead. :) :)

[fmgc]

Lufties management are ruthless with the competition (ask Go), EZY must be very careful not to upset Luftie otherwise they could be screwed by predatory pricing.

[FlyingIrishman]

Zulu,
Yes, you are basically right in what you say. However, the growth target is 25% per year and current growth is well above that target. I know it WILL come down over the next few years but shouldn't fall below 25%. I don't know what will happen if it does, but it shouldn't for a while because there are lots of opportunities still open in Europe.

That rumour of yours is wild, but you never know with Ryanair, things change quickly!