Low-cost airline easyJet has pulled out of plans to buy German operator Deutsche BA from British Airways.

EasyJet blamed conditions in the German aviation market and a failure to agree employment terms with Deutsche BA staff for the decision.

The Luton-based carrier secured an option with BA last May to acquire the airline, which operates 130 flights a day and employs 800 people.

It wanted to align the German operation with its own low-cost model but ran into difficulties with pilots over a new pay structure.

Chief executive Ray Webster said two "insurmountable hurdles" had prevented the deal going through.

He added: "The rigidity of German labour laws has made it impossible to get acceptance of easyJet conditions of employment from key staff groups, despite numerous attempts and different approaches.

"Secondly, since we negotiated the option, there has been a substantial deterioration in the financial performance of all airlines in the German market, including DBA.

Mr Webster said "aggressive pricing policies" by Lufthansa had lent specific characteristics to the German market, adding the company was not prepared to compromise its business model for the sake of the deal.

BA described easyJet's decision as disappointing but said it had still gained £6.1 million from easyJet's option payments.