Germany’s Lufthansa in BMI deal

Germany’s Lufthansa is to take control of UK airline, BMI, in a deal which will give Lufthansa control of more flights from London’s Heathrow airport, second only to British Airways.

The German airline is to buy 50% of the firm owned by BMI chairman, Sir Michael Bishop, who forced the purchase under a long-standing agreement. Lufthansa, was already BMI’s second-largest shareholder, with a stake of 30%.

Sweden-based Scandinavian Airlines (SAS) currently owns the remaining 20% of BMI.

Back in 1999, Lufthansa signed an agreement with Sir Michael that should he ever wish to sell his BMI stake, it would make the purchase.

While the German carrier acknowledges that the agreement will have an impact on competition at Heathrow, it said it was down to competition authorities to make a decision on whether to approve the deal, which is expected to be finalised in January.

Lufthansa has not disclosed what it was paying for Sir Michael’s stake but there is speculation that it is around £318 million.

BMI operates over 50 aircraft and flew more than 10 million passengers last year. It controls 11% of landing and take-off slots at Heathrow. While its two main hubs are Heathrow and Manchester, it also operates from 13 other UK airports.

Like many airlines, Lufthansa recently reported a 75% fall in net profit for the July to September period, which it blamed on higher fuel costs.

BMI announced a fall in pre-tax profits of 48% in 2007 to £15.5 million.

The news of the Lufthansa/BMI deal follows the announcement that Icelandic-owned, Sterling Airways has filed for bankruptcy today.

Story link: Germany’s Lufthansa in BMI deal