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British Airways’ Parent Wins Lufthansa’s BMI

The International Airlines Group, the parent company of British Airways and Iberia, will pay £172.5 million ($270 million) for the airline, known as BMI. That topped a competing bid from Virgin Atlantic Airways.

The purchase would give the group 56 additional daily take-off and landing slots at Heathrow Airport, Europe’s busiest, where it already controls 45 percent of the commercial air traffic.

I.A.G. said its full offer was only for BMI’s mainline carrier, which serves Europe, the Middle East and Africa, and was contingent on Lufthansa finding other buyers for two subsidiaries: BMI Regional, which serves Britain, and Bmibaby, a low-cost carrier.

“Buying BMI’s mainline business gives I.A.G. a unique opportunity to grow at Heathrow, one of our key hub airports,” Willie Walsh, the International Airlines chief executive, said in a statement. “Using the slot portfolio more efficiently provides the option to launch new long-haul routes to key trading nations.”

Mr. Walsh warned that there was an “urgent need” to restructure BMI, which lost £153 million in 2010 before tax and is expected to record another significant loss for 2011. As a result, this would require the elimination of an unspecified number of jobs in the short term.

Virgin Atlantic, which is owned by Richard Branson’s Virgin Group and Singapore Airlines, had made an eleventh-hour bid for BMI last week, arguing that a takeover by International Airlines would be “disastrous for consumer choice.” Virgin Atlantic controls 3 percent of Heathrow’s slots.

In a statement, Mr. Branson confirmed that Virgin Atlantic had ended its talks with Lufthansa, but said the company would ask British antitrust regulators to block the deal.

“Claiming that this deal is about new markets from Heathrow is a smoke-screen,” Mr. Branson said. “We will fight this monopoly every step of the way.”

Virgin did not disclose the value of its own offer, which British media reports last week said was closer to £50 million. Virgin said on Thursday that its bid was a “fair one in view of BMI’s financial difficulties.”

International Airlines warned that it would make a “significant” reduction in its £172.5 million offer if Lufthansa did not find other buyers for Bmibaby and BMI Regional before completion of the deal, which is expected in the first quarter of next year.

“BMI Regional and Bmibaby are not part of our plans,” International Airlines said.

BMI said in October that it was in “advanced discussions” to sell BMI Regional by the end of the year to a British investment group, which it did not identify.

Lufthansa declined to comment on the fate of Bmibaby. But according to one person with knowledge of Lufthansa’s plans, it has held initial discussions with a British-based aviation company about a possible sale.

The German carrier will be selling its BMI investment at a loss. Lufthansa paid £223 million, including an initial stake purchased from its founder, Sir Michael Bishop, in 1999. Lufthansa was then forced to take majority control when Sir Michael exercised a put option of his 50 percent plus one share stake in 2008.

(dealbook.nytimes)

 

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