Virgin cries foul as IAG agrees to take over BMI
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Saturday 05 November 2011
The takeover of BMI by the British Airways-owner IAG would be "disastrous" for customers, Virgin Atlantic warned yesterday as it faced defeat in the race to buy the smaller carrier from Germany's Lufthansa.
IAG said it had signed an agreement in principle to acquire BMI, with the deal expected to be finalised in coming weeks.
Although loss-making, BMI owns 8 per cent of the take-off and landing slots at London's Heathrow airport, which is running at full capacity. With the third runway no longer in prospect, the slots will allow IAG, which already commands the biggest share of take off and landing rights at the hub, to expand at Europe's busiest airport.
BMI's 8 per cent will supplement the 44 per cent of slots controlled by British Airways and the 1 per cent controlled by Iberia, the Spanish airline that merged with BA to form IAG earlier this year. With a total of 53 per cent after the planned deal, IAG will pull further ahead of Virgin, which controls 3 per cent of the slots at the capital's main airport.
IAG's chief executive Willie Walsh expressed confidence at getting the deal, which analysts reckon could be worth about £300m, cleared by regulators, as the group would still have a smaller share relative to that commanded by rivals at major Continental airports.
Air France-KLM, for example, controls 59 per cent of the slots at the Charles de Gaulle airport in Paris and 57 per cent at the Schiphol airport in Amsterdam. "Regulatory rules are not set by Branson – they are set by competent authorities," Mr Walsh said, referring to Virgin Atlantic founder Sir Richard Branson, whose Virgin Group remains the majority owner of the airline. But Virgin Atlantic, which has also made a bid for BMI, said British Airways already had too big a share of the slots at Heathrow.
"British Airways' hold over Heathrow is already too dominant and we are very concerned – as the competition authorities should also be – that BA's purchase of BMI would be disastrous for consumer choice and competition," it said.
"With Government limiting growth at London Heathrow, they cannot afford to turn a blind eye to the deterioration of competition that would results from a BA purchase of BMI."
The sale to IAG, which was announced alongside results from the group showing that its third quarter profits had declined to €363m against €528m last year, remains conditional on the binding agreement, further due diligence and regulatory clearances. Lufthansa, which took control of BMI from Sir Michael Bishop just over two years ago, has been looking to either turn around or offload the ailing carrier, which booked a 2010 net loss of £124.5m.
Mr Walsh was confident of reviving the airline's fortunes. "It is clear that BMI in its current form is unsustainable but we're confident we can make a success of it," he said.
Analysts said that, if completed, the deal would be positive for IAG and Lufthansa. The former would grow its clout at a key airport and the latter would be free of a drag on its profits.
"Without knowing the specifics of the deal, our initial reaction is that this a positive for Lufthansa," Stephen Furlong, an analyst at Davy Research, said. "BMI does not provide any significant strategic value for the company, and BMI has a negative impact on profits. We estimate that BMI will have an operating loss of €250m (£215m) in 2011."
- 1 Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
- 2 The black and blue dress: Makers considering a white and gold version
- 3 This is what it's like to be dead, according to a guy who died for a bit
- 4 PornHub turns masturbation into energy in bid to save the planet
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
Stephen Hawking's wife Jane Wilde on their marriage breakdown: 'The family were left behind'
Boris Nemtsov shot dead: Putin critic may have been murdered by Islamic extremists, says president-led committee
British are sexually uptight, dirty and drink too much – according to Spanish book
PornHub turns masturbation into energy in bid to save the planet
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...