It was announced today that German company Lufthansa will buy 50% of BMI’s shares giving it a 80% control of the British airline combined with the stake in the company it previously owned.
This take over will now make Lufthansa the second largest airline running flights from London’s Heathrow Airport, second only to British Airways, which should prove some competition to the flagship airline, however the deal will have to be overseen by trading standards in line with EU business competition regulations. The deal is expected to be completed mid January but Lufthansa have not announced the bid price.
There has been much speculation that Lufthansa will join forces with Virgin on long and short haul flights to dominate Heathrow Airport, providing some stiff competition for British Airways, who have recently teamed up with American Airlines. Lufthansa have not yet released any statements however regarding the takeover and their intentions for BMI’s future.
This is the second large investment in rival airlines Lufthansa has engaged in this year. Last month Lufthansa bought a 45% share of Brussels Airlines parent company SN Air-holding for e65m with the option to buy the remaining shares between now and 2011. Although the company has had two large investments this year it reported a 75% drop in profits this summer. Its profits in the last nine months is reported to be e984m.
BMI’s Chairman Sir Michael Bishop, who owns the 50% BMI shares Lufthansa is making a bid for, is believed to have forced the sale under a long standing agreement with the German airline that was originally signed back in 1999 which stated that if he ever chose to sell his shares Lufthansa would make the purchase. There is also speculation that other areas of BMI’s business could be sold off although no job cuts will be made.
BMI operates 54 aircraft, flying to 209 destinations and currently controls 11% of take-off slots at Heathrow Airport. Despite this net profits fell last year from £29.7m to £15.5m. Passenger numbers did rise however by 1% in the last year. This drop in profits was written by Lufthansa as part of a previously agreed partnership.