Virgin continue to fight for BMI
07.11.11
Virgin Atlantic chief executive Steve Ridgway plans to meet with Lufthansa on Thursday in a bid to beat BA parent IAG in the battle to acquire BMI. He described the battle for BMI as being ‘the last chance to preserve significant and decent competition to British Airways’. IAG and BMI owners Lufthansa have already reached an ‘in principle’ agreement, but Virgin is refusing to give up.
Mr Ridgway told the Telegraph newspaper that IAG will have a ‘massive competition mountain’ to climb to acquire BMI. He said there would be no competition on several routes from Heathrow, a situation that regulators would find difficult to accept. The deal would also see IAG’s share of Heathrow’s take-off and landing slots from rise from 45% to 53%.
Despite the in principle agreement between the German flag carrier and IAG, Mr Ridgway said he had been assured by Lufthansa that the sale process had not yet run its course. He said: ‘I guess BA is trying to put a gloss on it, but I don’t think they are any further ahead than we are and they have a massive competition mountain to climb. There is no exclusivity and there is no binding deal. They have reached an agreement in principle. Both companies have put bids in and there’s a huge amount of work to do. We haven’t done formal due diligence yet; neither have they. That will start now.‘
Willie Walsh, IAG’s chief executive, downplayed the competitive issues, arguing that at Charles de Gaulle in Paris, Air France-KLM control 59%of slots while at Schiphol airport in Amsterdam they control 57%. However, Mr Ridgway pointed out that other European airports do not have the same capacity constraints at Heathrow, with both Frankfurt and Paris having four runways, two more than its London competitor
Press reports suggest Lufthansa would prefer a cash deal for BMI, with Virgin thought to be offering some kind of merger that would leave the German airline exposed to any future losses at BMI. They also suggest that Lufthansa would prefer not it involve a middle eastern airline in the deal that could give them a strong base in Europe, with Virgin reportedly backed by Etihad. Virgin also has not 'agreement in principle' to buy BMI, and because IAG does, it is clearly ahead at the moment.
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