Planestation, the owner of Manston airport in Kent, agreed yesterday to buy EUjet, the no-frills airline which began services from there at the start of the month.
The deal values the budget airline at £4.5m and makes PlaneStation the first airport operator in the world to control its own airline.
PlaneStation already owned a 30 per cent stake in EUjet, which it acquired in May in return for a £2m cash injection. Now it is buying up a further 62 per cent of the airline by issuing £2.5m worth of share options to EUjet's founder and controlling shareholder, PJ McGoldrick, and its chairman, Ron Haylock.
The group also announced that it has raised £5.2m through a share placing to provide working capital for the development of EUjet, which hopes eventually to be carrying 2 million passengers a year.
Mr McGoldrick and Mr Haylock, who made his fortune building up a timeshare business, have been given warrants over 55.4 million PlaneStation shares which are exercisable at 4.7p in three years depending on certain performance conditions being met. The main one is that PlaneStation shares outperform the market by 25 per cent over the three-year period. Mr McGoldrick is also required to contribute €500,000 (£340,000) in working capital to EUjet and will join the board of PlaneStation.
Martin May, the chief executive of PlaneStation, admitted that vertical integration of the type represented by this deal had "gone out with the Ark" but he forecast it would make a comeback as airport operators and airlines sought to secure their future. "We are asset rich and EUjet has a revenue stream so putting the two businesses together at this stage in the cycle makes sense," he added. "As a result of this deal, EUjet has a future for ever at Manston."
EUjet has begun flights to 11 destinations from Manston (now known as Kent International Airport), including Amsterdam, Dublin, Prague and Nice, using two Fokker 100 jets. It plans to double its fleet and route network by Easter. So far it has sold 40,000 seats.
Mr McGoldrick said load factors were about 50 per cent but on some services, the plane was full and EUjet was flying 2,000 passengers each weekend. "It's building nicely and traffic levels are about what we expected but it's early days," he added.
Michael O'Leary, the chief executive of Europe's biggest no-frills airline, Ryanair, has forecast a "bloodbath" this winter in the low-cost sector. But Mr McGoldrick, himself a former Ryanair chief executive in the early 1990s, said the sale to PlaneStation had secured EUjet's future while there was a market of 1.5 million people in its catchment area of Kent and no competition from other budget airlines.