With the purchase of BMI, British Airways' owner, IAG, now has more than half the take-off and landing slots at Heathrow. This can't be good news for the travelling customer.
Even by the undemanding standards of airline economics, BMI is seriously ailing. It has first-rate staff and excellent service, but is a shadow of its former cartel-busting self, when – as British Midland – it took on British Airways at Heathrow and helped open up the skies to competition. It has a current promotion offering a business-class return flight to Marrakech for £259. Filling the posh seats at almost any price is the kind of desperate tactic it adopted to try to stem its losses – lately £38 for every passenger.
The losses have been borne by Lufthansa shareholders. The German carrier found itself the unwilling owner as a consequence of a complex financial deal. Ever since, in the manner of a parent seeking a home – any home – for an unwanted Christmas puppy, Lufthansa has been desperate to offload BMI.
Its value resides in its Heathrow slots. The only serious bidders were Virgin Atlantic and IAG. Inevitably, IAG bid much higher, reflecting the extra value it can extract from the slots and the benefits it will derive from the disappearance of a competitor. Since BMI abandoned its Glasgow route earlier this year, leaving BA as the sole operator from Heathrow, regular flyers report that fares have increased sharply.
Even if the regulators demand a token concession from IAG in the shape of surrendering a few slots, passengers from Aberdeen, Edinburgh and Manchester will have to get used to a single airline, BA, flying to Heathrow Terminal 5 – where it is the only tenant. Connections to Virgin Atlantic and other airlines will become more difficult, with perhaps the unintended consequence of delivering more business to Air France-KLM via easier hubs in Amsterdam and Paris.
Even when the deal goes through and we have grown grudgingly accustomed to "BA-plus", the UK will remain by far the most competitive market in Europe: easyJet and Ryanair will continue to appeal with no-frills alternatives. But the better outcome for BA and Lufthansa is the worse one for Virgin Atlantic and the travelling public.
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