British Airways is expected to announce soon that it will sell Go, its low-cost subsidiary, to 3i, the UK venture capital and private equity group.
The sale is likely to go ahead despite company announcements from BA tomorrow which are expected to show a quadrupling in profits from £84m to about £365m. In spite of these healthy figures, BA has been suffering substantial losses in its key North American routes, as well as in its short haul European operations and the company is intent on evidencing its continued commitment to cost-reduction and profit enhancement.
Go continues to be loss-making and has therefore been seen as a ready candidate for divestment. It has long been feeling the pinch from other low cost airlines such as Ryanair and Easyjet.
Go is planning to open a new base at Bristol International airport alongside its base at London Stanstead airport, in order to try to raise passenger volumes by 50 per cent to 4m over the coming year.
Bristish Airways and 3i have been in exclusive negotiations for several months. The airline is being advised by Goldman Sachs and 3i by SG Hambros, the UK investment banking arm of Societe Generale.