Saturday, March 31, 2012

The European Commission (EC) has approved yesterday a takeover of loss-making UK airline bmi from Lufthansa by International Airlines Group (IAG), owner of British Airways (BA). IAG will have to make concessions after Virgin Atlantic told the EC the deal would be anti-competitive.

The deal is set to cost IAG, who also own Iberia, £172.5 million. That value could fall as budget subsidiary bmibaby may be retained by Lufthansa or sold elsewhere, and IAG are reported to be primarily interested in the main bmi business. A regional subsidiary also exists.

IAG intends to use acquired slots at the busy Heathrow Airport, which serves London, to expand their own routes into Asia. The EC required IAG to surrender a number of flight slots at the airport. The slots surrendered or made available for lease are for use to destinations in Scotland, France, Egypt, Saudi Arabia, and Russia. The EC also insisted that combined BA/bmi routing be made available for competitors to buy transfer seats upon.

Lufthansa intended to shut down bmi had the bid failed. The transaction is presently scheduled for completion April 20.

IAG boss Willie Walsh called the sale “great news for Britain” with results that are “good for UK business and UK consumers.” Virgin boss Sir Richard Branson had previously said the move would give BA excessive dominance on Scottish flights. More Heathrow slots earmarked for Scotland have been given up than any other destination.

Ryanair took the opportunity to claim only their own takeover bid for Aer Lingus has been a major EC casualty. “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”, said Ryanair chief Michael O’Leary.