Takeover: Virgin, BA Fight to Buy BMI



BMI has an attractice 8.5% of landing slots at Heathrow Airport

BMI has an attractice 8.5% of landing slots at Heathrow Airport

The airline Lufthansa, owners of British Midland International (BMI), has announced that it is has not yet decided to whom it will sell the carrier.

The German airline signed an agreement with owner of British Airways, International Airlines Group (IAG), to work towards a deal in November.

However, since then Lufthansa has announced that it also has a deal with Virgin because the deal was not exclusive.

Two chances

The deals mean that both carriers now have the chance to buy BMI, and are vying for the position.

A Lufthansa spokesperson said that they signed an agreement with IAG only to look into the purchase of BMI, and now have a similar deal with Virgin.

The newer Virgin agreement was also signed in “late November,” just weeks after the IAG deal, the spokesperson confirmed.

IAG has said that despite the two deals, it will continue to negotiate with Lufthansa about the opportunity to purchase BMI.

Both Virgin and IAG have been “kept appraised” of the other parties involved in the potential, meaning that they can both proceed with due diligence on the BMI purchase.

The announcement that Lufthansa has not decided on a BMI buyer has had an effect on its shares, as shares in the company fell 4% on Monday.

IAG was also down 3.3% in early afternoon trading.

Purchase attractions

BMI operates flights to Europe, the Middle East, and Africa. It has 8.5% of the landing slots in Heathrow, the UK’s biggest airport and one of the busiest in Europe.

Analysts suggests that this large share of landing slots is the main attraction of BMI’s purchase.

The move is especially attractive for IAG, which would have control of more than half of the landing slots at Heathrow after the purchase of BMI.

Rival airline Virgin Atlantic says that giving IAG the BMI deal would hurt market competition, as BA’s “hold over Heathrow is already too dominant.”

However, any deal would need to be cleared by competition authorities.

Virgin seeks the deal to keep landing slots away from rival British Airways, but also may have an easier time channelling passengers from Europe onto transatlantic flights.

While BMI may have valuable Heathrow landing spots, Lufthansa has decided to sell its 80% holdings in the company after its losses widened.

BMI lost a reported £133 million during the first 3 quarters of the year. Its profits were hit by both rising fuel costs and unrest in multiple destinations in North Africa and the Middle East.

 

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