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Easyjet Expands With Purchase Of BA-Affiliated Carrier

by Jason Gorringe, Tax-News.com, London

26 October 2007


EasyJet has announced that it has agreed to acquire the entire issued share capital of GB Airways Ltd, excluding its slots at Heathrow Airport, from the Bland Group Limited, for a cash consideration of GBP103.5 million.

GB Airways is primarily a London Gatwick based point-to-point airline operating to destinations across Southern Europe and North Africa under a franchise agreement with British Airways PLC.

It serves 31 destinations and operates 15 Airbus aircraft (9 A320s and 6 A321s), with an average age of 4.1 years, which are complementary to the easyJet fleet of 107 A319s. In total it operates 39 routes – 28 from Gatwick, 6 from Manchester, and 5 from Heathrow.

Based upon its statutory accounts under UK GAAP for the year ended 31 March 2007, GB Airways reported profit before tax of GBP2.6 million and EBITDAR of £35 million on revenues of GBP250 million; it carried 2.8 million passengers; had gross assets of GBP182 million, and net assets of GBP33 million.

The acquisition of GB Airways is consistent with easyJet’s expansion strategy and, importantly, strengthens its customer offering at Gatwick, the airline’s biggest base, said the airline.

Following the acquisition, easyJet will operate 24% of Gatwick’s slots, and will fly approximately 8 million passengers across 62 routes from Gatwick.

By Winter 2008/09, GB Airways will be fully consolidated into the easyJet business model, releasing cost savings. The acquisition will be positive to easyJet’s earnings per share and return on equity in easyJet’s current financial year, before one-off integration costs, claimed the airline.

Andy Harrison, Chief Executive of easyJet, announced that: “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. 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."

He continued: "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.”

Kevin Hatton, Chief Executive of GB Airways, added: “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.”

The total consideration of GBP103.5 million is payable in cash, of which GBP11.5 million is held in escrow as security for any claims under the acquisition agreement.

Completion is subject to the usual conditions, including approval from the relevant regulatory authorities. The transaction is expected to complete no later than 31st January 2008.


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