Doubts cast over British Midland float

DOUBTS ARE growing in the City of London about whether Sir Michael Bishop, the chairman, will proceed with a flotation of British Midland, the country's second-biggest scheduled airline, following its entry into the Star Alliance group of carriers.

Announcing the link-up last week - and the sale of a 20 per cent stake in British Midland to Lufthansa of Germany - Sir Michael, who retains a controlling 60 per cent stake, indicated that a public offering was now the most likely option. Advisers suggested that British Midland would come to the stock market within the next 18 months.

However, analysts believe that a far more likely outcome remains a sale of the airline to Lufthansa which, together with United Airlines of the United States, spearheads the Star Alliance.

One leading airline analyst said that it would suit British Midland to appear to be remaining independent while regulatory approval is being sought from the competition authorities in Brussels for the Star Alliance entry.

However, he said that British Midland would always be much more valuable to Lufthansa than it would to private stock market investors because of the price an airline would pay to acquire its runway take-off and landing slots at London's Heathrow airport.

British Midland controls 14 per cent of all the runway slots at Heathrow airport, second only to flag carrier British Airways, which has a 38 per cent share. In total the 10 member airlines of the Star Alliance control 27 per cent of Heathrow's slots.

British Midland is currently valued at pounds 457m, based on the pounds 91.4m that Lufthansa paid to the Scandinavian airline SAS, another Star Alliance member, to buy its 20 stake.

Advisers argue that were the British airline to be sold it would fetch a far higher price because any buyer would have to pay Sir Michael a premium for gaining control of the airline group.

However, were Sir Michael to opt for a flotation, he would have to sell the airline on a multiple of more than 50 times last year's earnings to achieve a valuation of pounds 500m.

Pre-tax profits at British Midland fell by 34 per cent last year to pounds 11m on sales of pounds 560m, despite passenger numbers rising to a record six million.

British Midland expects its profits to improve this year because of a recovery in the UK domestic and outbound market and improved business- class traffic.

However, some analysts claim that all the company's profits are being generated by its engineering and ground-handling divisions, and that its actual airline passenger operations are losing money.

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible