Virgin Express first-quarter losses soar to £8.4m as BMI talks continue

Virgin Express, Virgin's 60 per cent-owned discount airline, reported a near doubling of first-quarter losses as another part of Sir Richard Branson's empire, Virgin Atlantic, continued its merger talks with bmi British Midland.

British Airways, which was linked with a bid for either Virgin Atlantic or bmi over the weekend, said it was "keeping its options open". Reports suggested BA was plotting a way to break up any deal between Virgin Atlantic and bmi.

BA's executive management met yesterday, with some suggesting this was to formulate a strategy in response to the Virgin/bmi threat. Virgin Atlantic and bmi have been in talks for some time, with everything from a code sharing agreement to a full-blown merger on the agenda. It is unclear, however, how BA can muscle in, as Virgin Atlantic and bmi are private companies.

A Virgin Atlantic spokeswoman said: "Richard Branson has said pigs will fly before he ever sells Virgin to BA. We are simply not for sale. And [a BA bid for] bmi would never get past the regulators."

In a further twist, it has emerged that Virgin Atlantic considered a bid for BA a couple of months ago, before turning its attention to bmi. The Virgin spokeswoman said bmi's short-haul routes made for a better fit with its long-haul business.

Virgin Express, meanwhile, reported a €11.7m (£8.4m) loss for the first quarter of the calendar year, from €6.7m in 2002. The company partly blamed the deterioration on concerns about war and terrorism, as well as Easter falling outside the first quarter. However, the numbers of scheduled passengers grew 9 per cent.

David Hoare, executive chairman of Virgin Express said: "This [passenger] growth was achieved in a challenging trading environment in which the major operators have been discounting their ticket prices in order to stimulate the market and fill their excess capacity."