British Airways’ Owner Reaches BMI Deal
UK – International Airlines Group (IAG), owner of British Airways and Iberia, has reached an agreement to purchase struggling airline BMI from its German owner, Lufthansa. The deal for the loss-making airline is thought to be worth around £172.5 million, but could lead to job losses.
The move will see IAG increase its hold at the UK’s busiest airport, Heathrow. The group already has a stranglehold on the airport, but this deal will see IAG land an additional 56 taking off and landing slots at Heathrow. The increase in slots would mean that the group holds around 53 per cent of the slots at the airport.
Chief Executive of IAG Willie Walsh did warn that staff at BMI could find themselves without a job in the New Year once the deal is completed due to business restructuring, but that this should not come as a surprise considering the scale of BMI’s losses.
Mr Walsh went on to say that one of the main reasons for the purchase would be the chance for IAG to achieve significant growth at Heathrow, thus allowing them to launch new long haul flights and improve domestic ones.
The price of the acquisition may end up being reduced from the £172.5m cash price IAG has offered if Lufthansa chooses to sell BMI regional and BMI baby before the deal is completed.
Both airlines have said that they hope the deal will be completed within the first quarter of 2012, subject to regulatory approval by the competition authorities. Other carriers, including Virgin, have expressed the view that the IAG deal is non-competitive because of the dominant position that British Airways is already in at Heathrow.
Lufthansa has been trying to sell BMI for many years after it was forced to buy the airline when the founder sold its majority stake back in 2009. Lufthansa had tried a number of tactics to improve the airline, including a focus on oil industry routes. Unfortunately the political unrest across the Middle East ruined any chance that BMI had of returning to profit.
IAG has seen an improvement on its shares since the announcement, as they opened 1.3 per cent up at £1.47 in London trading.