BMI For Sale

[BC Tam 2]

IAG mulls British Midland International move as Lufthansa kicks off sale

September 12, 2011

 

FRANKFURT, Sept 12 — International Airlines Group (IAG) is still keen to get hold of rival BMI’s coveted slots at London’s Heathrow airport, after a report that Germany’s Lufthansa was exploring a sale of the loss-making unit.

 

“We have made no secret of our interest in bmi’s Heathrow slots,” a spokeswoman for IAG, formed by the merger of British Airways and Iberia, told Reuters today. “Lufthansa said a few weeks ago that they were looking at their options regarding bmi, so the ball is firmly in Lufthansa’s court, but there’s nothing imminent happening from our side.”

 

A source familiar with the matter said yesterday that Lufthansa had mandated banks to sound out a potential sale of BMI, adding that Morgan Stanley was one of the banks appointed, though the process was at an early stage.

 

Lufthansa board member Stefan Lauer said earlier this month that Lufthansa was making all efforts to turn BMI around but that one of the options being explored was to find a partner.

 

A Lufthansa spokeswoman today referred back to Lauer’s comments, saying the situation had not changed since then.

 

BMI controls about 11 per cent of the take-off and landing slots at Heathrow, the world’s second-busiest airport, making it second there only to BA, which has around 42 per cent of the slots. BMI’s slots were valued at £616 million (RM2.950 trillion billion ? ) at the end of 2008, down from £770 million a year earlier.

 

A source close to the transaction said selling BMI would be a “mammoth task” for Lufthansa because there was no obvious buyer for the airline.

 

The source also said completion of any sale was unlikely until next year, but that Lufthansa’s priority was to sell bmi as a whole, including the slots. The UK carrier will be sold in parts if Lufthansa does not find a full buyer, added the source.

 

Breakup move

 

When Lufthansa bought half of bmi from Sir Michael Bishop in 2009, the deal drew criticism from analysts because the British carrier was seen dragging down the Germany company’s earnings without offering hope for a speedy turnaround.

 

BMI’s £124.5 million 2010 net loss compared with a profit of €1.1 billion at Lufthansa.

 

“The idea could well be to break it (bmi) up, but Lufthansa really needs to find an exit from bmi one way or another, because it’s hitting profits and dragging the group down,” said Stephen Furlong, an analyst at Davy Stockbrokers. “Apart from IAG, other possible buyers would be Virgin Atlantic , Aer Lingus and one of the Gulf carriers.”

 

Lufthansa could still decide to sell some of the slots internally to sister units such as Swiss or Austrian Airlines, flushing cash into bmi’s coffers and giving other company units access to Heathrow slots.

 

Failing that, Lufthansa may seek to offload bmi’s regional and low-cost carrier BMI-baby, which does not fit its core business plan of using new additions to the group to feed into its premium long-haul route network.

 

“I don’t expect anything to happen imminently, but Lufthansa has an investor day in two weeks, where I expect the bmi issue to be debated,” said Furlong.

 

Shares in IAG, which have fallen a third in the last three months, were 3 per cent down at 147. 4 pence by 1301 GMT, valuing the carrier at around £2.8 billion.

 

Lufthansa, whose shares have fallen by a quarter since June, were 2 per cent down at €10.35, valuing the airline at around €4.8 billion. — Reuters

 

from here

Edited September 13, 2011 by BC Tam

[Mohd Suhaimi Fariz 2]

IAG's aiming for the Heathrow slots.

[Y. J. Foo 0]

If IAG buys them, will that means BMI becomes another OW member? Doubt BA and IB would be happy if BMI stays in *A after the acquisition...

 

 

[Isaac 0]

Or BMI will be fully absorbed into BA.

[BC Tam 2]

Thing is BA/Iberia more interested in the LHR slots than BMI as a whole, whilst Lufthansa (understandably) is more inclined towards the 'lock, stock and barrel' route

On another note, surprising to know that Lufthansa's valuation is so much higher than BA/Iberia combined

[Pieter C. 5]

To get a foothold in the UK, and esp. at LHR, AF-KL should make a try to buy BD...

 

I doubt BA will be allowed to buy BD, for competative reasons...

[BC Tam 2]

I doubt BA will be allowed to buy BD, for competative reasons...

That very true

I recall even the BA/Iberia tie up was also quite problematic in that respect

In the same vein, would IAG be allowed to buy even just the LHR slots from BMI ?