Oct. 25 (Bloomberg) -- EasyJet Plc, Europe's second-biggest discount airline, agreed to buy GB Airways Ltd. for 103.5 million pounds ($212 million) to add 15 planes and overtake British Airways Plc at London's Gatwick airport.

The cash purchase from Bland Group Ltd. will boost the number of takeoff slots EasyJet controls at Gatwick from 17 percent to 24 percent, the Luton, England-based airline said today. GB will cease operating as a franchisee of British Airways, which had first option to buy the carrier.

EasyJet has made three acquisitions in the past eight years, including Go Fly Ltd., a low-cost British Airways franchise, in 2002. The airline wants 25 percent of passengers to be business fliers, who tend to make more expensive, late bookings. Business travelers now make up about 20 percent of EasyJet's customers.

``This is a good deal,'' said Geoff van Klaveren, an analyst at BNP Paribas in London who has an ``outperform'' recommendation on the stock. ``EasyJet's strategy is to attract business passengers and to do that you need to have a strong presence at major airports.''

Shares of EasyJet in London rose 39.5 pence, or 6.8 percent, to 622 pence, the biggest gain since Aug. 7. British Airways advanced 10 pence, or 2.4 percent, to 433.5 pence.

GB Airways operates 15 Airbus SAS A320-series aircraft and serves 31 destinations in southern Europe and North Africa. The company had a pretax profit of 2.6 million pounds last year on sales of 250 million pounds and carried 2.8 million passengers.

`Bite-Size'

``This is really a bite-size bolt-on acquisition that makes us bigger at Gatwick, which is our biggest base,'' EasyJet Chief Executive Officer Andy Harrison said on a conference call with journalists today.

The purchase excludes GB's slots at London Heathrow airport, Europe's busiest, which will be sold by Bland Group under three separate agreements, EasyJet said in a statement today.

British Airways will control 17 percent of slots at Gatwick after EasyJet's acquisition, Willie Walsh, chief executive officer of the London-based carrier, said today on a conference call with journalists.

Overtaking British Airways at Gatwick ``could have taken five years to achieve by organic growth,'' Chris Avery, an analyst at JPMorgan in London with an ``overweight'' recommendation on the stock, said in a note to investors today.

Shifting Business Models

EasyJet will probably ``downsize sharply the GB head office and make many efficiency improvements as it migrates from the British Airways franchise model, with business-class and frills, to the EasyJet low-cost model,'' Avery said.

GB will adopt the EasyJet brand starting on March 29. EasyJet has ``no plans'' to cut any GB routes, which include destinations such as Alicante and Ibiza in Spain, and Corfu, Greece, Harrison said.

GB's seat profitability should reach EasyJet's level in the first full year of operation, EasyJet Chief Financial Officer Jeff Carr said on the conference call. There will be scope to reduce overhead costs and add revenue from ancillary or non- flight sales such as food and drinks, he said.

As of October 2008, British Airways will no longer have any U.K. franchise partners. The BMED franchise, which flies to Africa and the Middle East, was bought by BMI in February, and Loganair's franchise agreement will end Oct. 25, 2008.

``U.K. franchises have outlived their purpose,'' Walsh said today. ``I think franchising outside your home country makes sense.'' The airline still has franchise agreements with Comair Ltd., based in South Africa, and Denmark's Sun Air.

The carrier started franchising with GB in 1995 to help attract transfer traffic to its main operations. The agreement, with GB operating under British Airways flight codes, was due to end in 2010.

Travelers booked on GB flights after March 29 can be rebooked onto EasyJet flights or get a refund.

To contact the reporter on this story: Tracy Alloway in London at talloway@bloomberg.net.

Last Updated: October 25, 2007 12:07 EDT