British Airways, Virgin Atlantic among bidders for bmi

Tuesday, September 8, 2009, 7:39 by Jose Philip

At least one dozen airlines have reportedly approached Deutsche Lufthansa, the flag-carrier airline of Germany, expressing interest in buying bmi (formerly, British Midlands Airways).The loss-making airline bmi is owned by Lufthansa, the national carrier of Germany. It was only in 2009 that Lufthansa took control of bmi, but now the German airline intends to sell bmi or break it with a view to strengthening its finances.

bmi is headquartered in Castle Donington, England, and located close to East Midlands Airport.

The prospective buyers also have signed what is called “non-disclosure” agreements with Lufthansa to access confidential data on bmi, the website wsj.com has reported.

The Britain-based airline Virgin Atlantic confirmed that it is interested in buying bmi, according to the report.

British Airways, the flag-carrier airline of the United Kingdom, too, is considering a possible bid for rival bmi and the two companies have already held talks on the matter, the Sunday Times newspaper has reported.

According to the report, any deal with Lufthansa would be “secondary” to British Airways’ ongoing talks on merger with the Spain-based carrier Iberia (Iberia Lineas Aereas de Espana SA), but British Airways will consider financing a bid for bmi through issuing shares.

The Sunday Times, however, said it is not yet sure whether Lufthansa will sell bmi. Lufthansa had enhanced its sake to 80% earlier in 2009 after Michael Bishop, the founder of bmi, exercised an option that compelled the German national carrier to buy his stake of 50% plus one share.

An aviation expert was quoted as saying that though Lufthansa will keep the sale of bmi an option, it is in no hurry and will take its time to arrive at the “right decision.”

Right now, Lufthansa is concentrating on restructuring bmi and reducing its losses, which might fetch the ailing carrier a better price later.

In May 2009, Willie Walsh, chief executive officer of British Airways, had expressed his interest in bmi’s landing slots.

bmi, with its operational base at Heathrow Airport in London, mainly operates short-haul services to destinations around the United Kingdom continental Europe.

The carrier’s chief attraction is that it keeps about 11% of the available landing slots at Heathrow Airport in London. And, landing slots at Heathrow Airport are the most coveted slots in the commercial aviation industry – more so after the Open Skies agreement was signed in 2008, which allowed airlines in the United States and Europe to fly from and within the United States or Europe.

This means that if British Airways buys either bmi or its slots, it will enhance considerably the British national carrier’s leading position at Heathrow Airport.

At present, British Airways holds 41% of all available slots at Heathrow Airport. Hence, in the opinion of aviation experts, any alliance between British Airways and bmi is likely to infringe upon antitrust regulations as well as earn hostile responses from competitors.

British Airways, besides holding merger talks with Iberia, is seeking antitrust immunity in the United States for a closer alliance with the US-based American Airlines.