The Bmi group plans £45 million in further cost cutting after plunging £100 million into the red last year.

 

The airline group is in talks with unions over a pay freeze for 2009 as it looks to finalise a takeover by 30% shareholder Lufthansa by the second quarter of the year.

 

The only outstanding conditions for completion of the deal which will see founder Sir Michael Bishop sell his majority stake of 50% plus one share are EU anti trust approval and CAA consent.

 

“The process in obtaining these approvals is well advanced and it is anticipated the transaction will close in the second quarter of 2009,” a trading statement said.

 

BMI lost £99.7 million against a profit of £7 million in 2007 and reduced staff numbers by 263 over the period to 4,658 at the end of last year.

 

The number of passengers carried last year was down to 10 million from 10.6 million the previous 12 months. The group is made up of mainline operations from Heathrow, a regional arm and budget carrier Bmibaby.

 

Chief executive Nigel Turner said the results were hit by the “unprecedented and extremely challenging” market conditions reported throughout the airline industry.

 

He said: “Fuel costs were up by £60 million net of fuel surcharge benefits and Heathrow charges rose by £12 million following another generous regulatory settlement by the CAA in favour of BAA.

 

“Revenues of the business were again impacted by the reputational problems of Heathrow Airport.

 

“The chaotic opening of Terminal 5 and the consequent knock on delays to airlines moving terminals impacted on improvements to these facilities.

 

“Notwithstanding these challenges, bmi maintained a very high performance of punctuality well ahead of the major carrier at the airport.  

 

“We have taken steps to review all areas of the business to control costs and conserve cash against the continuing economic weakness in 2009.”

 

The first two months of 2009 have “continued to be challenging” against the background of weakness in the overall global economy, the group said.

 

Capacity has been further reduced in all segments of the business except the growing mid-haul sector which has made “significant improvements” year-on-year.

 

“Market share gains have been made on many routes but this is against a backdrop of downtrading and overall market conditions which are making the outlook for the rest of the year uncertain,” the group said.

 

“Bmi is engaged in constructive negotiation with its union partners to agree a pay freeze for 2009 and has plans already in place to reduce costs by a further £45 million compared to its budget for the year.”

by Phil Davies