Financial News
- 26 December 2011, 11:20
Air Wars Resume As BA Owner Buys BMI
The owner of British Airways, International Airlines Group (IAG), has agreed to buy loss-making BMI in a deal that has infuriated its main UK rival.
IAG says the sale - for £172.5m from German national carrier Lufthansa - to the BA parent company should be concluded in the first quarter of next year, subject to regulatory approval.
It has warned of job losses at BMI as a result of future restructuring.
The move has also fanned the flames of the long-standing bitter rivalry BA has had with Virgin Atlantic.
Virgin, which had also been in the running to buy BMI, has confirmed it is to launch an attempt to block the agreement claiming it would be "dangerous" for the British travelling public.
By seizing BMI, IAG would secure more than 50% of landing slots at Heathrow Airport.
Virgin said: "We will be asking the competition authorities to stop this deal and to protect the many millions of passengers on routes where BA and BMI currently compete.
"With Heathrow sewn up, BA can use its monopoly power to force up prices at the expense of the consumer."
Sir Richard Branson added "This deal simply cuts consumer choice and screws the travelling public."
He continued: "We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry and bad for Britain."
In an interview for Sky News the chief executive of IAG Willie Walsh insisted this was a "great deal" for consumers as it would offer new destinations and he was confident he could work with regulators to secure the deal.
The IAG boss pointed out that the 53% hold it would have at Heathrow would compare with Lufthansa's 66% at Frankfurt airport and Air France KLM's 59% grip at Paris's Charles De Gaulle airport.
He said: "I think we'll bring jobs to the UK".
Mr Walsh added "All the research shows that the development of joint ventures can benefit the consumer.
"I think there will be challenges...BMI's results have been appalling."
He also refused to confirm the future of the BMI brand, saying it could potentially come under BA's identity.
Under the agreement, Lufthansa has the option to sell its business units BMI regional and low-fare carrier BMI baby before completion - and the price will be reduced ifLufthansa does not opt to sell the latter.
BMI, which employs more than 3,600 staff and flies to Europe, Middle East andAfrica and destinations within the UK, made a £153m pre-tax loss in the year to 2010.
BMI regional offers short-haul flights from Aberdeen, Edinburgh, Glasgow, Leeds Bradford, Manchester and East Midlands, while BMI Baby flies primarily out of East Midlands and Birmingham.
what do you think?
bryan
When have BA's prices ever been competative??? I have never known them so to be in that vein. Another example of how German interests are going to affect our economy. The German schnauzer lady and yje french poodle will be well pleased by this back door proposal. I think Branson shoul be given more consideration.
Trevor Brassett
bmi also flies to and from stanstead
Christopher Hodson
This should go to the monopoly commision. Why should we loose choice and competition. BA have never been good at both fare prices or service. I stopped using this airline many years ago. There are still better airlines and prices to buy up the opposition is anti competative but good business sense
Gordon Berry
I fly many times a year to see grandchildren.US,South Africa, Australia. I also go to Mexico, France and Spain. I have stopped using BA: their service is poor; the staff are unhelpful. They treat one as if they are doing one a favour. Branson is not cheap but at least he is competition for them. I find the best experience is Emirates.
David Wragg
Sadly, I think that this deal will be allowed as the report shows that foreign airlines hold a larger proportion of slots at their main base than BA will have even after the deal. Problem is that BA has treated its domestic passengers with disdain and drops important services from London to Edinburgh, etc, as soon as anything goes wrong. BA has also closed its non-London stations and dropped direct flights to Europe from Birmingham and Manchester, while it failed completely tom start any at all from other airports, leaving that to the newer airlines and to foreign companies. BA has been a disaster and should not have been allowed to buy BMI. Lufthansa bought a pup as BMI loses £38 for every passenger carrier - something badly wrong somewhere.
Name witheld
This comment has been removed for violations of our Terms and Conditions.
theholyoneII
8:50am on 22/12/2011
Looks like Branson is acting like a spoiled little brat again as some one beat him to the toy box