British Airways yesterday drew a line under its expensive foray into continental European aviation markets by disposing of Deutsche BA, its persistently lossmaking German subsidiary.
DBA was sold for a symbolic €1 ($1.15) to Intro Verwaltungsgesellschaft, a German aviation consultancy and investment group headed by Mr Hans Rudolf Wohrl, a Bavarian businessman with interests too in the retail clothing and property sectors.
The deal follows the collapse earlier this year of BA's attempt to sell the business to EasyJet, Europe's biggest low-cost airline.
The disposal of DBA, which has lost money every year since it was founded in 1992, will cost British Airways about £50 million (€69.5 million).
It has agreed to inject additional cash liquidity of €35 million into the business and will also pay the lease costs for DBA's fleet of 16 aircraft of about €3 million a month for one year.
If Intro should manage to turn round the DBA business, British Airways will share in part of the improved performance, however, receiving 25 per cent of any DBA profits, or 25 per cent of any profit on the disposal of DBA, up to June 2006.
Historically DBA has lost €30-€40 million a year for the past decade, and it has run into increasing problems in the last two years, as it tried to restructure towards a low-cost airline model in the face of fierce competition in the German domestic market.
Mr Roger Maynard, BA director of investments and joint ventures, said the deal was "a sensible one in the current climate. It ends our exposure to German losses yet gives us the benefit of a share in any profits that the company makes in the next three years".
Most importantly the disposal will end BA's exposure to the heavy costs that would have been incurred by closing down DBA, which appeared likely after the failure of the negotiations with EasyJet.
