BMI Reveals Approaches From Ailing Airlines

By Danny Fortson Business Correspondent

Several airlines struggling to cope with the record oil price have approached BMI to sound out whether the carrier would be interested in buying them.

“They have already started coming to us,” said the chairman Sir Michael Bishop after a speech in which he predicted that the slowing economy and the record price of fuel was leading to a clear division of airlines into the “haves and have-nots.” Those able to withstand the difficult conditions – five airlines have folded in recent weeks – would be determined largely by their fuel hedging positions. BMI, he said, has hedged 75 per cent of its fuel for this year.

Start-up carriers and those with insufficient scale to withstand the increase in operating costs are likely to be the most vulnerable. The approaches BMI has received have thus far been informal, Sir Michael said, but he added he is keen to expand BMI through “bolt-on acquisitions”. His comments come at a trying time for the airline industry. The threat of recession in America and Europe coupled with near-$120 per barrel oil is pushing many carriers to the wall.

Franois Bacchetta, the managing director of EasyJet’s French business, gave a frank assessment of the market earlier this week. “There are currently about 50 low-cost carriers on the European market – that’s absurd. In a few years’ time, there will be no more than about three or four of us left in Europe,” he said.

Sir Michael declined to comment on what he intends to do with his 50 per cent-plus-one stake in the carrier. Lufthansa, the German carrier, owns 30 per cent of BMI and has the option to buy him out. SAS, the Scandinavian airline, has put its 20 per cent stake up for sale. The European Commission yesterday asked for greater detail of the Italian government’s move earlier this week to grant a $300m loan to beleaguered Alitalia to ensure that the deal does not fall foul of state-aid rules.

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