THE LUFTHANSA Group has announced that it intends to sell its fully-owned subsidiary, British Midland International (bmi) to the International Airlines Group (IAG). The carrier has struggled to cope with rising fuel costs, while political unrest in the Middle East and North Africa has had a significant impact on the airline’s traffic figures, leading to a €154 million (US$206m) loss for the first nine months of the year.
The sale to the Anglo-Spanish consortium, IAG, which currently owns British Airways and Iberia, is reported to have been agreed in principle. However, final closure of the deal, which is expected to be completed in the first quarter of 2012, remains dependent upon the completion of due diligence and regulatory clearance.
The sale of bmi has attracted interest from several potential suitors, with Virgin Atlantic confirming that it had entered a bid for the British airline.
“We can confirm that we have made a bid for bmi, and are working with Lufthansa on the next stage of the purchase,” a spokesman for Virgin Atlantic confirmed. “We remain committed to the acquisition of the carrier and believe that our offer will lead to the best outcome for the millions of consumers that fly in and out of Heathrow every year.”
While Lufthansa has confirmed IAG as the preferred bidder, regulatory clearance represents a significant hurdle – with bmi currently holding 8.5% of the highly sought-after landing and take-off slots at London/Heathrow, the airline’s acquisition by IAG would increase the consortium’s share of the slots to almost 60%. With capacity at the airport virtually exhausted, any deal may yet be scuppered by the UK’s Competition Commission. Conscious that the sale to IAG may yet be opposed, Virgin is persevering with its bid for the carrier and added that it was “very concerned” about the potential situation at Heathrow. “IAG’s purchase of bmi would be disastrous for consumer choice and competition. With the government limiting growth at Heathrow, they cannot afford to turn a blind eye to the deterioration of competition that would result.”
Although Lufthansa has placed the entire bmi group for sale, reports have emerged that each division, including the mainline carrier, low-cost airline bmibaby and Aberdeen-based bmi Regional will be sold separately. Talks are already at an advanced stage for the sale of the latter to a UK-based investment group, with a statement from the airline confirming that it would continue to operate the winter 2011/12 timetable as bmi Regional.