EasyJet, the budget airline currently in takeover talks with rival Go, has made a deal with British Airways to buy its German subsidiary.

EasyJet has agreed an option to buy Deutsche BA, which has a 16-strong fleet, at any time up to March 31 2003.

EasyJet will pay 600,000 euros (£375,000) a month until the exercise of the option and will also contribute 5 million euros (£3.1 million) towards the cost of turning DBA into a low-cost airline.

If it exercises the option, easyJet will then pay a further amount between 30 million euros (£18.8 million) and 39 million euros (£24.4 million).

Chief executive Ray Webster said: "This arrangement gives us the opportunity to establish easyJet as the largest low-cost airline in Germany in one step and enhance our growth opportunities."

News of the deal comes just days after it emerged easyJet was in talks to snap up Stansted-based rival Go.

Today Luton-based easyJet also posted a surge in interim turnover and profits as demand for low-cost air travel continued to boom.

For the six months to March 31, revenues leapt 36 per cent to £194 million while pre-tax profits came in at £1 million.

Last year easyJet posted interim losses of £10.3 million.