IAG secures bmi deal
British Airways owner IAG has reached a binding agreement with Lufthansa to buy troubled airline bmi for £172.5 million.
But the airline group, which also owns Iberia, has warned that the deal could mean job losses.
BA chief executive Willie Walsh said: “Given the scale of bmi’s losses, there is an urgent need to restructure the business.
“Unfortunately, this will mean some job losses but we will secure a significant number of high quality jobs here in the UK and create similar new jobs in the future.”
The acquisition, which is due to completed in the first quarter of 2012, will see IAG gain an additional 56 daily slot pairs at Heathrow.
IAG said Lufthansa has the option to sell bmi regional and bmibaby before completion. There will be a significant price reduction if Lufthansa does not opt to sell bmibaby before completion.
The takeover is still subject to clearance by competition authorities.
Lufthansa had also been in talks with Virgin.
Virgin Atlantic today confirmed it was no longer in talks with Lufthansa and vowed to fight the IAG deal all the way.
“The offer we have made for the business is a fair one in view of bmi’s financial difficulties and doesn’t account for any premium that BA might pay to cement its monopoly position,” it said.
“We have a strong business that will continue to grow successfully and we will not overpay for bmi.
“If the acquisition is completed, it will tilt the competitive landscape dangerously towards BA and cast a shadow over the British travelling public.
“We will be asking the competition authorities to stop this deal and to protect the many millions of passengers on routes where BA and bmi currently compete. With Heathrow sewn up BA can use its monopoly power to force up prices at the expense of the consumer.”
But Walsh insisted the deal was good news for the UK and for consumers.
“Buying bmi’s mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports,” he said.
“Using the slot portfolio more efficiently provides the option to launch new longhaul routes to key trading nations while supporting our broad domestic and shorthaul network.
“This deal is good news for the UK as we will maintain a comprehensive domestic schedule including Belfast. Our plans to expand our longhaul network would guarantee growth by making Britain better able to compete on a global scale. It will also help maximise Heathrow’s position as a world class hub airport.
“Customers will benefit from access to new destinations, more convenient schedules, enhanced frequent flyer benefits and greater investment than had been possible for loss-making bmi.â€
IAG said it intends to finance the purchase from its own funds, with £60 million of the purchase price paid in four instalments to Lufthansa pre-completion. This amount will be secured by Heathrow slots.
By Bev Fearis
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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