A binding agreement has been signed regarding the sale of Lufthansa subsidiary bmi to IAG (the consortium which owns British Airways and Iberia). The sale is still subject to regulatory clearance – no small issue considering the impact on slots at Heathrow – but the two companies expect the deal to close in Q1 2012. Lufthansa expects the impact of the sale to be off their books by the end of next year while IAG will spread the costs of the acquisition and restructuring over a three year period.
IAG only wants the mainline operations of the bmi portfolio. As part of the deal Lufthansa is still shopping the bmi regional and bmibaby units to other potential suitors. If the bmibaby brand is not unloaded there are "significant" price reductions to be accounted for. And Lufthansa is still on the hook for the pension plan of bmi employees. At the same time, IAG will receive up to 56 additional slot pairs at Heathrow, further growing their position as the largest operator there.
IAG CEO Willie Walsh offered up the following comments:
Buying bmi’s mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports. 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.
Sure, maintaining the schedule is easy. The real question is what fares will look like without competition on the routes. It is rare that losing a competitor in a market makes things better for the customer.
I really do need to redeem the last of those Diamond Club points quite quickly.
Never miss another post: Sign up for email alerts and get only the content you want direct to your inbox.