November 3, 2008

Lufthansa to Acquire BMI to Strengthen Heathrow Presence

German airline operator Deutsche Lufthansa has acquired access to a significant percentage of takeoff and landing slots at the London Heathrow Airport following its decision to exercise an option to increase its stake in BMI to 80%.

Lufthansa has announced its decision to acquire a 50% plus one share stake in BMI from its chairman Michael Bishop for E400 million. The option to increase Lufthansa stake in BMI had been worked out 10 years ago. The remaining 20% of BMI is owned by the SAS Group.

BMI owns approximately 11% of the takeoff and landing slots at Heathrow, with rival British Airways (BA) owning around 41% of the slots. Lufthansa could decide to use these slots to aggressively expand its services on the trans-Atlantic route or sell these slots. The German airline is not expected to take any concrete decision till the BMI deal is finalized in 2009.

There has also been speculation of a possible merger of Virgin Atlantic with BMI. Virgin Atlantic's CEO, Steve Ridgway, has said that it makes sense to combine Virgin Atlantic and BMI, as the respective long-haul and short-haul networks would complement each other well and create a potential competitor to BA.

Virgin Atlantic is 49% owned by Singapore Airlines, which is Lufthansa's Star Alliance partner. Together Lufthansa, BMI and Virgin Atlantic could account for around 17% of the takeoff and landing slots at Heathrow.