A MAJOR shake-up in the world of the low-cost airlines was imminent after rivals easyJet and Go announced they were in takeover talks.

Luton airline easyJet is seeking to buy Go, which was formerly owned by British Airways.

The announcement comes just two weeks after Stelios Haji-Ioannou, easyJet's flamboyant founder and chairman, announced he was quitting.

Any merger of the two companies could create serious problems for rivals such as Ireland's Ryanair.

The low-fare carriers have generally bucked the downward trend aviation has experienced since September 11. Many business executives now shun the major airlines and favour the no-frills operators. EasyJet said its negotiations with Go were at an "advanced stage" and the move was part of plans to expand in the European short-haul market.

The company said it was considering all possible opportunities for expansion, including the addition of new slots and routes.

"Since September 11, these opportunities, including corporate transactions, have increased significantly and are under active consideration," it said.

However, easyJet said any deal had to be in the interests of its shareholders, customers and staff.

Mr Haji-Ioannou said last month he was a "serial entrepreneur" and would step down next year to focus on other ventures, although he conceded shareholder pressure had also played a part.

A number of institutional investors expressed concern at the group's recent annual general meeting that a substantial shareholder such as Mr Haji-Ioannou was also chairman.

EasyJet was launched in 1995 and now flies to 45 destinations, using 31 aircraft. As well as flying from Luton, in Bedfordshire, the carrier also operates from Gatwick and Liverpool. Its overseas airport hubs are at Amsterdam and Geneva.

The carrier employs 1,900 staff and posted profits of £40.1m for the year ending September 2001 on turnover of £356m.