Ryanair swoops

31 January 2003

KLM could not afford to fund its lowcost subsidiary. And it could do without the distraction from its core business. Ryanair investors had better get used to acquisition risk. The lowcost airline industry is so fragmented that organic expansion won’t do.

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Ryanair, the Irish lowcost airline, agreed to pay E23.9m for the share capital of its rival Buzz. On completion of the deal, Buzz would have E19m of cash, Ryanair claimed.

Buzz will generate revenues of E140m, and suffer a double digit loss at the pretax level in the year to March 2003, Ryanair said in a statement. The deal will close on or after April 1.

Buzz operates a network of 21 routes from London Stansted, Ryanair's main UK base, to destinations in Germany, Holland, France and Spain, as well as two French domestic routes. This summer it will operate a fleet of 6 BAe 146 aircraft and 6 Boeing 737300s. Buzz's owner, the Dutch flag carrier KLM, has agreed to take back all of the remaining BAe146 aircraft on March 31 2004.

Since Ryanair is growing strongly … the last thing we need is the distraction of an acquisition. However there are a number of features of Buzz which makes this a favourable move at this time, Ryanair chief executive Michael O'Leary said.

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