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British Airways German subsidiary to be sold

British Airways announced yesterday that it had signed a binding ‘heads of agreement’ deal with easyJet for the sale of Deutsche BA (DBA), its subsidiary which flies exclusively in Germany.

Under the terms of the 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.

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 .

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 British Airways’ Future Size and Shape package of measures to reduce costs and return the shorthaul business to profitability.

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 this announcement.

Ray Webster, Chief Executive Officer easyJet, said: "Germany is the biggest domestic air market in Europe. But it is 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. This arrangement gives us the opportunity to establish easyJet as the largest low-cost airline in Germany in one step and enhance our growth opportunities."

NOTES

Deutsche BA was formed in 1992.

It is Germany’s second largest scheduled domestic carrier and employs 860 staff.

It has a fleet of 16 Boeing 737-300 aircraft with leather seating throughout and operates 130 flights each day on seven German domestic routes.

It operates routes from : Berlin to Düsseldorf, Cologne/Bonn, Munich and Stuttgart and from Munich to Düsseldorf, Hamburg and Cologne/Bonn. 

In the last financial year to March 31, 2001 Deutsche BA had a turnover of £212.5 million and carried 3.5 million passengers.

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