Go's Barbara Cassani could get �16m

He may sell enough shares to take his family's stake below 50%, the Sunday Telegraph reported. The family owns 58.5% of Easyjet at present.

A merger of Easyjet and Go would create the biggest budget airline on routes between Britain and Europe, putting Dublin-based Ryanair in second place.

Its chief executive is thought likely to be Ray Webster, who currently runs Easyjet, according to the Sunday Times.

Boss out of work?

Mr Haji-Ioannou has already announced his intention to stand down as chairman of Easyjet next year in favour of Sir Colin Chandler.

Barbara Cassani, the American-born boss of Go, therefore looks likely to be left without a job.

However, she is expected to bank about �16m for her 4% stake in Go under the terms of the takeover.

Ms Cassani, who led the management buyout of Go from British Airways just 11 months ago, said on Friday she was "extremely despondent that Go will no longer be an independent company."

She told staff in a recorded message that the offer from Easyjet "was just too attractive" for 3i, the venture capital group who backed her buyout, to resist.

The venture capital group could walk away with about 14 times what it invested in Go less than a year ago and make a profit of �220m, the Financial Times reported.

Raised eyebrows

Go's passenger numbers have been increasing, showing it has recovered well since the 11 September attacks rocked the airline industry.

It carried just under half a million passengers in March, compared to 310,300 in January.

But some analysts have questioned whether the merger means budget carriers harbour doubts about their claims of scope for strong organic growth.

Mr Haji-Ioannou has insisted that Easyjet's promise of "35% organic growth is safe".

Buying Go will produce a "100% step-change" in growth by bringing expansion more quickly and smoothly, he told the Sunday Times.

Virgin Express has denied it is considering a rival bid for Go, though it hopes to hold talks with 3i next week.

"It's unlikely Virgin Express would consider a late bid, but...the chairman, will contact 3i next week to see if there are any opportunities as we're planning a major expansion on the mainland of Europe," a company spokesman said.

Ms Cassani was recently named Veuve Clicquot businesswoman of the year.

Easyjet shares ended the day up nearly 5% at 472p with Ryanair up 2% at 382.5p.

BA shares were 4% lower at 229.5p.