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Budget airline easyJet has confirmed that it has agreed to buy GB Airways, as British Airways (BA) ends a franchise deal with the carrier.

In a statement easyJet revealed that it would pay £103.5 million to acquire GB Airways, which currently flys passengers to southern Europe and North Africa under the BA brand.

A separate statement issued by BA confirmed that it was ending its current franchise agreement with the company, although GB Airways will continue to operate under the airline's brand until March 29th 2008.

GB Airways currently operates 39 on routes - 28 from London's Gatwick airport, five from the city's Heathrow airport and six from Manchester.

Explaining its decision to takeover GB Airways, easyJet said the deal would allow its business to strengthen its customer offering at Gatwick - its biggest base. The company stressed the purchase would also allow it to take advantage of additional take-off and landing slots and provide the opportunity to accelerate the introduction of new routes from the airport, which it says has a "highly attractive" catchment area in London and the south-east.

Following the sale easyJet says that it will operate 24 per cent of Gatwick's slots and fly around eight million passengers across 62 routes from the airport.

The airline expects to have completed the integration of GB Airways into its operations by winter next year, with the acquisition expected to have a positive impact on easyJet's earnings.

Commenting on the takeover easyJet chief executive Andy Harrison said: "The deal will bring major benefits to both easyJet and GB Airways customers, delivering a wider choice of destinations at easyJet's great prices and creating clear value for our shareholders."

GB Airways chief executive Kevin Hatton added that the sale agreement brought an end to a "period of uncertainty" about the future direction of his company.

Meanwhile BA chief executive Willie Walsh has declared that UK franchise agreements between airlines have "outlived their purpose".

Mr Walsh, who revealed BA had rejected the opportunity to buy GB Airways itself, said easyJet's offer had enabled his company to end its franchise deal with the airline early.

BA also announced that it intends to end its franchise with Loganair from October 25th next year and is to begin a codeshare arrangement with the Scottish carrier.