European Commission approves bmi takeover

The controversial takeover of UK airline bmi by British Airways' parent company was approved by the European Commission this afternoon - but with conditions attached.

In return for Brussels' agreement, BA's owners, International Consolidated Airlines Group (IAG), must give up 14 pairs of daily take-off and landing slots at Heathrow as a contribution to boost competition in the sector.

IAG must also commit to carry connecting passengers to feed the long-haul flights of competing airlines out of London Heathrow.

With IAG's agreement to the conditions, said a Commission statement, the takeover "would not raise competition concerns".

European Commissioner for competition policy Joaquin Almunia said: "The commitments package includes an appropriate number of very sought-after slots at London Heathrow as well as far-reaching feeder arrangements as regards connecting passengers.

"We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers."

IAG has offered the following commitments to the EC as part of the regulatory process:

* Seven daily slot pairs to be used between Heathrow and either Edinburgh and/or Aberdeen;

* Five daily slot pairs to be used between Heathrow and the following destinations - Nice, Cairo, Riyadh, Moscow, Edinburgh and/or Aberdeen;

* Two Heathrow daily slot pairs will be leased to airline Transaero for use on flights to Moscow;

* Other airlines can apply for seats on the integrated BA/bmi short and mid-haul network for their transfer passengers, on normal commercial terms.

IAG chief executive Willie Walsh said: "We're delighted the EC has given competition approval for our acquisition of bmi. Their decision follows a thorough review during which the views of key stakeholders have been taken into account.

"This is great news for Britain. Over time we will launch new long-haul routes to key trading nations that are currently not served from Heathrow while supporting our short-haul network. This is good for UK business and UK consumers. We have already announced that British Airways will re-start flights from Belfast to Heathrow, maintaining important economic links."

He went on: "Expanding our long-haul network also helps Heathrow grow as an international hub airport despite its infrastructure constraints.

"This deal will maintain high-quality jobs at bmi and create similar jobs when we expand. More British jobs will be saved than if bmi had closed. BA will consult with bmi staff and their unions as soon as possible.

"We plan to operate bmi's summer schedule and will update their customers once the transaction has been completed."

The acquisition cost of bmi is unchanged at £172.5 million in cash, on a debt-free, cash-free basis, but is subject to significant price reductions if Lufthansa, bmi's current owner, does not opt to sell no-frills carrier bmibaby.

The Commission said its original investigation into the request for merger clearance found that triggered "high market shares and even monopolies" on domestic, European and international air routes from Heathrow.

There was also the risk that IAG would prevent passengers from connecting on long-haul flights operated by competing airlines.

But subsequent IAG concessions on access to take-off and landing slots, and willingness to enter into special agreements with competing long-haul operators on passenger connections meant air travellers "will therefore continue to have a choice to use other airlines than IAG when connecting at London Heathrow".

The Commission statement said: "These commitments adequately address all competition concerns identified by the Commission. The Commission therefore concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it."

Last month Sir Richard Branson warned that if the takeover went ahead it would give BA an effective monopoly on some Scottish routes.

His Virgin Atlantic airline had formally complained about the plan to the Commission.

Completion of the deal is expected to take place around April 20. Following completion, it is intended that bmi mainline will be integrated into BA during the coming months.

Jim McAuslan, general secretary of pilots' union Balpa, said: "For us, protecting these British jobs was always paramount and while we need to look at the fine print, today's announcement seems like good news. But it's not the end of the story.

"IAG has so far made it clear that they only intend to run the bmi mainline operation and that although they must take over the bmibaby and bmi regional businesses as part of the transaction, these businesses do not figure in their plans. Balpa will be looking to protect those jobs whether in IAG or with any other potential buyer."

He went on: "But even with the Heathrow-based bmi mainline there is a huge amount of work to do to integrate and create a sustainable operation, and we recognise this is not going to be a painless process.

"BA pilots have already agreed cost-saving measures to help smooth the transition but legal impediments until now have meant that bmi pilots and their Balpa representatives have not been able to talk directly with BA management about the future.

"Following this announcement that process can now start and we are calling for early talks with management to progress that and make this a success for all our members.

"Also continuing to figure in our concerns is the responsibility for the bmi pension fund and we will be calling on the TUC to press the UK pension regulator for further discussions as to how this critical element of Lufthansa's divestment is being handled.

"A secure future for these British jobs is a good thing. Today's announcement gives a foundation, but there will be a lot more work needed to deliver this. Balpa commits to doing its part to make it happen and providing secure futures in a less-than-secure world."

Bmi mainline has 350 pilots, bmi regional 150 and bmibaby 140.

Low-fare Irish carrier Ryanair said the only significant EU airline merger that had been prohibited was its own merger with Irish airline Aer Lingus.

Ryanair boss Michael O'Leary added: "Today's rubber-stamping of BA's purchase of bmi shows yet again that the EC has one rule for Europe's flag-carriers, but different rules for Ryanair.

"While we have no objection to BA's acquisition of bmi, it will undoubtedly lead to higher fares and higher fuel surcharges, and give BA/IAG even greater control (over 55% of slots) at the heavily congested Heathrow."

PA