British budget airline easyJet said it has sealed a deal to buy rival Go for £374 million sterling to create the biggest low-cost carrier in Europe.
EasyJet said it would launch a share rights issue, or a sale of new shares to existing shareholders, to drum up about £277 million to help fund the deal, with the remainder coming from existing cash reserves.
EasyJet Chairman Stelios Haji-Ioannou said the deal was one of the most exciting developments in his airline's history.
Ryanair said today that it welcomed today's deal as a confirmation of a consolidation trend in the European low-fare market.
But Ryanair Chief Michael O'Leary said his airline continues to have lower costs and faster growth and would eventually surpass its new enlarged competitor.
Ryanair, which was toppled from the top spot among European budget airlines by today's deal, said it had expected the European low fares market to boil down to 'two large operators, Ryanair and easyJet'.
The takeover of Go, set up in 1998 by British Airways, comes less than a year after BA sold the carrier for £110 million in a management buy-out financed by venture capitalist group 3i, leaving BA to concentrate on premium passengers.
Since then the budget airline market has taken off, allowing no-frills carriers such as easyJet, Go and Ryanair to take on bigger, established airlines such as BA, Air France and Germany's Lufthansa.
'The European low-cost airline market has grown significantly in the last few years, providing us with many opportunities. Combining easyJet and Go will provide additional critical mass and enable us to move forward faster,' said easyJet chief executive Ray Webster.
'Both airlines are built on common business models. These models encompass similar values, cultures and fleets and we intend to take the best people and working practices of both companies to create a low-cost airline with the scale and capabilities to capitalise on any opportunity in Europe,' he said in a statement.
But easyJet said that the flamboyant chief executive of Go, Barbara Cassani, would not be joining the new group in any capacity. The 41-year-old mother of two, who was named British businesswoman of the year in April, was said to have been hostile to a takeover bid by easyJet.
