Ryanair says it sees "no value" in buying Go, the low-cost carrier put up for sale by British Airways yesterday for around £300 million sterling (€500 million). Mr Michael Cawley, Ryanair's commercial director, said the Irish company would be interested only if "BA paid us to take it off their hands".
Mr Cawley's bullish remarks come ahead of second-quarter results due today from Ryanair that will show the airline is on track for 25 per cent organic growth this year. "Why would we want to buy Go when we can achieve that level of organic growth by just buying new planes?" he asked. BA announced it was selling the low-cost airline at the same time as it unveiled a 400 per cent increase in pre-tax profits to £200 million sterling for the three months to September 2000.
Started in May 1998, Go has 500 staff and flies around 2.7 million passengers a year to 24 destinations. It was set up by BA to try and win back some of the European traffic lost to Ryanair and other low-cost, no-frills airlines.
Last year Ryanair flew 5.6 million passengers and made profits of €72.5 million (£57 million) after tax. Stansted-based Go has yet to return a profit for BA but will break even in 2001, according to its parent.
"The model is all wrong. They have expensive planes and fly into expensive, congested airports," according to Mr Cawley. He said Ryanair would not be interested in buying its competitor in order to close it down. The purchaser would be someone "interested in losing money", he predicted.
Market analysts are less dismissive of BA's chances of offloading its low-cost subsidiary. "Go should be eminently sellable. But how many airlines the market can ultimately support is a different question," according to Mr Ian Wilde, an airline analyst with SG Securities in London.
"It is definitely a sellable asset," according to Mr Damien Horth of ABN Amro in London. "The strong performance of the low-cost sector should make Go a relatively attractive investment," he said.
US merchant bank Goldman Sachs is to advise BA on the sale. A management buyout led by Go's chief executive, Ms Barbara Cassani, who has been pressing for independence for the airline, is seen as a serious possibility.
Luton-based EasyJet, which has always maintained that Go had an unfair advantage by having BA behind it, yesterday welcomed the sale. But EasyJet, which is attempting a flotation itself, scotched suggestions that it could step in for Go.
The airline said it would "take extreme care before taking a decision to look at Go and would only do so at the right price".
With the drive to make savings and reorganise its short-haul operations, BA said Go "no longer fitted inside our strategy". BA chief executive Mr Rod Eddington added: "We are taking a ruthless approach towards poorly performing routes and assets. Those not adding value are being removed."
Certain Gatwick routes have already been cut or transferred and further plans for Gatwick will be announced shortly. The BA service between Dublin and Gatwick is operated by the BA Cityflyer franchise.
Mr Eddington said any further cuts would occur through natural turnover and voluntary redundancy.
BA has been plagued over the past year by high fuel prices, high costs and stiff competition from low-cost airlines in Europe.
Yesterday, it gave its strongest sign yet that a strategy to fly smaller planes with more premium travellers and fewer economy-class passengers was working.
