Lufthansa buys the rest of the stake in bmi from Scandinavian Airlines System

Deutsche Lufthansa AG, the flag-carrier airline of Germany, which owns 80% of bmi, is to buy the rest 20% stake from the Scandinavian Airlines System (SAS).

Lufthansa said it will pay about £19 million to the Scandinavian Airlines System, based in Sweden, for its stake – with a further £19 million to cancel a shareholder deal relating to bmi.

Scandinavian Airlines System is the multi-national airline of Norway, Denmark and Sweden,

According to the deal, the German national carrier also will have to pay the Scandinavian Airlines System an extra sum in case it sells all or parts of bmi in the next two years.

Lufthansa had bought Brussels Airlines in 2008 and had recently acquired Austrian Airlines.

Lufthansa, bmi and the Scandinavian Airlines System are members of the Star Alliance group.

In a statement, Lufthansa said its options include continuing the operations of bmi or selling it.

bmi (British Midland Airways), based in Castle Donington in England, is the second biggest airline at Heathrow Airport in London, after British Airways. The airline operates flights to cities in Europe, Central Asia, Africa and the Middle East. London’s Heathrow Airport is bmi’s operational base.

Aviation analysts say that the global airline industry – including bmi’s rivals Virgin Atlantic and British Airways – will be keenly watching Lufthansa’s decision on bmi, especially since bmi controls 11% of the profitable takeoff and landing slots at Heathrow Airport.

The takeoff and landing slots at Heathrow Airport are very expensive and are the most sought-after airport slots in the global aviation industry, especially since the ‘Open Skies’ agreement was signed in 2008, which allowed airlines in Europe and the United States to fly from and within Europe or the United States. Also, the growth of an airline at Heathrow Airport depends on trading slots as there is little chance of Heathrow Airport’s capacity to expand in the absence of a third runway there.

However, it is also a fact that potential buyers may be put off from bidding for bmi, mainly owing to the uncertainty about the airline’s present size of its pension deficit. Apart from this, there are the challenge that bmi is confronting in dealing with pension liabilities and also with trade unions while trying to reduce costs.

bmi has s far declined to divulge the size of its deficit, saying that it has not yet filed its accounts.