BA takes peek at BMI

Speculation that British Airways is keen on buying BMI from Lufthansa is almost certainly misplaced. For one thing, a merger of the two biggest slot holders at Heathrow would have no chance of regulatory approval.

For another, BA needs cash – it has been losing £1 million a day. BA bosses might like the idea of putting a rival out of business and cannibalising its customers and routes, but they will have to settle for a look at BMI’s books.

BMI owner Lufthansa is offering rivals a limited spot of due diligence ahead of a possible sale of parts of the carrier. Were Lufthansa to sell the whole of BMI, it would be unlikely to recoup its outlay of just two months ago when it sealed a takeover – buying founder Sir Michael Bishop’s controlling stake – at an inflated price based on a deal agreed 10 years earlier.

Virgin Atlantic might be interested because it has no control of feeder traffic into Heathrow and BMI would offer that. Yet could it get the cash? Flybe might be interested in BMI’s regional traffic, and almost any long-haul carrier with funds–perhaps those based in the Gulf – would be keen on BMI’s slots at Heathrow.

But why would Lufthansa sell the potentially most-profitable bit of BMI operations to a rival? Consider Lufthansa’s acquisition strategy. It bought Swiss to become number one at Zurich, bought Austrian Airlines to be number one at Vienna, and acquired a large stake in Brussels Airlines to boost its presence at Brussels. Why would it not want to be number two at Heathrow?

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