MAX KINGSLEY-JONES / LONDON
Surprise sees Irish carrier strike back at EasyJet in European low-fare airline battle
Ryanair has raised the stakes in its battle with EasyJet for Europe's low- fare airline market, agreeing a €24 million ($26 million) deal to acquire rival Buzz and placing orders for up to 100 more Boeing 737s.
Buzz, KLM's wholly owned London Stansted-based low-fare arm, operates eight BAe 146-300s and six 737-300s on 21 European routes from Stansted and claims to be Europe's third-largest low-fare airline.
KLM says the disposal follows a strategic review of the low-fare sector, which determined "satisfactory profitability for a standalone Buzz would be difficult to achieve".
Although Ryanair was pushed into second place in Europe's lowfare airline rankings by the EasyJet/Go merger, Ryanair chief executive Michael O'Leary had vowed it would be Europe's biggest scheduled carrier by 2010.
He has previously stated that this would be achieved by organic growth rather than acquisitions. He now says although "the last thing we need is the distraction of an acquisition", the Buzz deal is "opportunistic" and a "bargain".Flight International estimates that the Buzz acquisition closes Ryanair's gap to EasyJet in terms of passengers carried, although EasyJet would surge ahead if it takes up its option in March to purchase Germany's DBA.
Ryanair UK/Europe sales and marketing manager Sin‚ad Finn says the net cash cost of the deal is "relatively small change at less than €5 million".
O'Leary says the acquisition is a "timely strategic move", and that he intends to resolve Buzz's "structural cost problems" within 12 months, dropping unprofitable routes and increasing frequencies on the remaining services.
The agreement includes the sale of Buzz's UK air operator's certificate (AOC), enabling Ryanair to compete with EasyJet on services from the UK to non-European Union central European states. This is currently not permitted under its Irish AOC.
Meanwhile, Ryanair has added 22 firm 737-800 orders for delivery in 2004-5, and taken options on 78 more in a deal worth $6 billion. The purchase will bring Ryanair's outstanding 737 commitments to 250 aircraft (125 firm and 125 options) - all of which are due for delivery by 2010.
|Aircraft (on order)||50 (124)||14||64 (124)||65 (133)||16||81 (133)|
|Passengers m ***||15+||2||17+||18.5||3||21.5|
|Revenue €m n***||829||140||969||1,457||300||1,757|
|*Includes Go **Excludes overlapping routes ***Forecast to 03/03; EasyJet rev to 09/03|