IAG announce deal to buy BMI
04.11.11
British Airways' parent International Airlines Group (IAG) has reached an agreement to buy loss making airline BMI from Lufthansa. The deal will give IAG more than half of all take-off and landing slots at Heathrow, strengthening its hold on one of the world's most important transport hubs. The deal remains subject to conditions including a binding purchase agreement, further due diligence and regulatory clearances. Both declined to comment on the value of the deal until an agreement is signed, although press reports put it at €350 million.
The attraction of BMI lies in its control of 9% of valuable slots at Heathrow. IAG and Lufthansa hope to sign the purchase agreement in the coming weeks and aim for the sale to be completed by April 2012, subject to regulatory approval. IAG chief executive Willie Walsh has said that the group does not have exclusivity on the BMI deal yet but that he is confident that it will be cleared by regulators. Speaking to BBC Radio 4 this morning, he said IAG will have around half of the slots at Heathrow, still less than rivals Lufthansa at Frankfurt and Air France/KLM at Paris.
Mr Walsh said that IAG can make a success of BMI, which operated at a loss of £38-per-passenger in the first half of the financial year and has a pension liability of around £100 million, and that passengers would get a 'fantastic deal'. He said: ‘This is a great story for IAG and also great for the UK economy and for consumers. We will expand our networks, particularly on long-haul, which is so critically important to the UK economy. The deal will allow us to connect further to the emerging world economies.'
However, the news has angered rivals, including Sir Richard Branson's Virgin Atlantic, which had also made a bid for BMI. A Virgin spokesman said: ‘British Airways' hold over Heathrow is already too dominant and we are very concerned, as the competition authorities should also be, that BA's purchase of BMI would be disastrous for consumer choice and competition.'
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