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Ryanair to buy rival Buzz
LONDON, England -- Ryanair, Europe's second-biggest budget airline, is buying rival Buzz from Dutch carrier KLM for 23.9 million euros ($25.8 million) as it expands its regional operations. The all-cash deal is another step in the consolidation in Europe's discount airlines sector. "The timing of this acquisition is opportunistic. Since Ryanair is going strongly by rolling out the lowest fare services all over Europe, the last thing we need is the distraction of an acqusition," Ryanair Chief Executive Michael O'Leay said in a statement. "However, there are a number of features of Buzz which makes this a favourable move at this time ... " Dublin-based Ryanair said the deal, which is expected to be completed by April 1, was good value and would contribute to its earnings per share by the next financial year. Both Ryanair and Buzz have major hubs at London Stansted Airport. Buzz operates 21 routes out of Stansted. Ryanair said it hopes to increase Buzz's passenger level to 4 million this year from 2 million and eliminate its operating losses next year. "I am confident that this significant and timely rationalisation will elimate these losses in Buzz over the coming year. With a change of aircraft fleet Buzz will be in a position to match Ryanair's low fare, profitable growth from 2004 onwards," O'Leary said. KLM said on Friday that it valued Buzz at 30 million euros, about 6 million euros above the purchase price, but said it would receive airport slots and other items from Ryanair as part of the deal.
"It's certainly not negative," KLM Chief Financial Officer Rob Ruijter said in a conference call from Amsterdam. "The worst thing that could happen is that it's a neutral scenario. It depends how one or two things will flesh out." Ryanair shares were down 1.2 percent to 6.50 euros in early Dublin trading on Friday, while KLM was down 3.1 percent to 7.61 euros in Amsterdam. Major carriers like KLM, British Airways, Lufthansa and Air France have been forced to slash ticket prices on routes across Europe as low-cost airlines encroach on their territory. They have also been forced to cut routes, ground aircraft and sack staff to cope with the fallout from the September 11 attacks on the United States. Last year, KLM failed in its bid to buy Go-Fly from BA. The carrier was later sold to easyJet of the UK, creating Europe's biggest budget airline. Low-cost airlines are expected to grow 30 to 35 percent a year over the next two years.
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