Carlyle Group joins forces with KLM in bid for GO
Carlyle Group, the US private equity firm, has joined forces with KLM, in the Dutch flag carrier's negotiations to take over Go, the low cost subsidiary of British Airways.
Go announced on Friday that it would establish a second UKoperating base at Bristol airport in south-west England, in addition to its main base at London Stansted, as part of its plan to raise passenger volumes by 50 per cent in the coming year to 4m.
KLM and Carlyle have made a conditional offer to take over Go with the aim of combining it with Buzz, the Dutch group's own low cost subsidiary, which is also based at Stansted.
The Carlyle Group, which was formed in 1987 and is headquartered in Washington DC, has invested more than $5.8bn of equity in over 200 transactions. The Carlyle Europe fund,which is working with KLM, has invested in 13 European companies since 1998 mainly in engineering and communications as well as in Le Figaro, the French media group.
The KLM/Carlyle consortium is competing against a rival bid from 3i, the UK private equity and venture capital group. Final offers are expected to value Go at around £100m ($147m), and BA is aiming to complete the transaction by the end of the month. The bids were reviewed yesterday by the BA board.
Leo van Wijk, chief executive of KLM, the Dutch national airline, said earlier this week that the group had submitted a conditional offer to take over Go. "If it is acceptable we can firm it up…then we can call it a final bid."
Both bidding groups have made clear in negotiations with BA and Goldman Sachs, its financial adviser, that they would retain the well-regarded Go management team led by Barbara Cassani, who led the start-up of Go in 1997.
Ms Cassani, who is believed to be the world's only female airline chief executive, said on Friday that she was "happy to keep on running the business…I am open to working with whoever BA drops into exclusive negotiations."
She said that she had not yet started direct talks with either bidder on the role the management team would play in the future ownership of Go. "Whoever buys Go is going to make a lot of money and I want to be part of that," she said.
Go selected Bristol airport as its second base from a shortlist of 20 other airports in the UK and continental Europe.
It is aiming to carry more than 500,000 passengers to and from Bristol in its first year with flights beginning to six destinations across Europe from May 22.
The destinations will be selected from the 22 already served by Go from Stansted. Low cost airlines have played a crucial role in the fast growth of Stansted in the past three years and the arrival of Go at Bristol is likely to increase its scheduled traffic by 50 per cent this year.
Bristol handled around 2m passengers last year shared equally between scheduled and charter traffic.
Go was increasing its fleet of 737-300 aircraft from 13 to 18 this year, said Ms Cassani. Two aircraft would be based at Bristol initially with a third added in the autumn and a fourth in the first half of next year.
One hurdle to combining Go with the smaller and still loss-making Buzz operation would be the problem of combining the aircraft fleets.
The Buzz fleet still includes eight four-engined BAe146 aircraft which have much higher operating costs than the larger twin-engined Boeing 737s used by most low cost airlines including Go and its bigger rivals Ryanair and Easyjet.
"I am open to sensible suggestions on how the two businesses could be put together but aircraft are an added complexity," said Ms Cassani.
Go has been reviewing its aircraft policy for the long-term and considering whether to remain with an all-Boeing 737 fleet or to switch to the rival Airbus A320 family of aircraft.
Ms Cassani said the decision on the future fleet strategy would have to be taken with Go's new owners.
