BA tightens its Heathrow grip with £172m BMI buy

Deal is screwing the travelling public, says Branson after Virgin Atlantic's rival bid fails

The owner of British Airways yesterday saw off rival Virgin Atlantic to secure a £172.5m acquisition of BMI that gives it control of more than half of Heathrow's coveted landing slots.

Sir Richard Branson, founder of Virgin Atlantic, immediately hit back, saying the deal would "screw the travelling public". It means International Airlines Group, the holding company of BA and Iberia, will have 56 more landing slots at Heathrow, lifting its share of the schedule at the world's busiest airport from 45 per cent to 53 per cent.

Willie Walsh, chief executive of IAG, admitted that there would be job losses when BMI, which employs 2,500, is bought from Germany's Lufthansa, although exact numbers were not known. But he dismissed Sir Richard's attack, saying: "I don't take any notice of what he says. I don't think you'd expect him to come out with anything apart from opposition. He's not a spokesperson for the consumer. We will deal with the regulators and any issues that they raise."

Analysts said IAG had secured a good deal, particularly since Lufthansa has agreed to take over the liabilities of BMI's defined benefit pension scheme, valued at about £180m. "The [purchase] price is significantly lower than consensus forecasts of about £300m," Oriel Securities said. In October, Citigroup valued BMI's Heathrow take-off and landing slots alone at €460m (£383m). Three years ago, Continental airlines paid $209m for just four slots.

The all-cash deal saw IAG shares rise 3 per cent to 149.9p.

Mr Walsh claimed the acquisition of BMI was "good news for the UK" since BA will switch most of the carrier's short-haul slots to long-haul destinations in emerging markets, including China, Korea, Indonesia and Vietnam. "There's no question the balance of economic power is shifting towards the East," he said. "We need to get the UK connected."

Sir Richard responded: "Claims that this deal is about new markets from Heathrow are a smokescreen. It simply cuts consumer choice and screws the travelling public. We will fight this monopoly every step of the way."

The takeover is still subject to clearance but Mr Walsh said IAG had already had early discussions with European Commission regulators. "We wouldn't have put so much time and effort into this deal if we didn't believe it was possible," he added.

Lufthansa was forced to take control of BMI, founded more than 70 years ago as Air Schools, training RAF pilots, when its chairman, Sir Michael Bishop, sold his shares for £220m two years ago. The carrier operates almost 2,000 commercial flights a week, making it the second-biggest airline in Heathrow. It reported an operating loss of €154m for the first nine months of this year,

The terms of the acquisition mean Lufthansa can still sell off the Bmibaby and BMI regional brands before disposing of the airline. If it does, IAG said its final price would be "significantly" lower. Mr Walsh said he was not planning on dumping the BMI brand "in the short term".

The chief executive — who last year said IAG had a shopping list of 12 airlines — played down the chances of further purchases next year. Analysts have discussed IAG's interest in Portugal's national carrier TAP, but Mr Walsh said: "We've got work to do with BMI. Acquisitions next year are unlikely."

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Finance Officer

Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Technical BA - Banking - Bristol - £400pd

£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice