British Airways to take over bmi Heathrow slots?

Last Friday Lufthansa announced that International Airlines Group (IAG), essentially British Airways and Iberia, had reached an agreement in principle to purchase the German airline's loss making subsidiary British Midland Ltd.  The sale and closing of the deal remains subject to conditions, including a binding purchase agreement, further due diligence and regulatory clearances.  It is envisaged that a contract would be signed in the coming weeks with the aim for the transaction to be completed in the first quarter of 2012.

Fronting the IAG reasoning Chief Executive Willie Walsh pointed out that his company would still only finish up with 53% of Heathrow slots, considerably less than Lufthansa’s 64% in Frankfurt and Air France 58% at Charles de Gaulle.  Steve Ridgeway, his equivalent at Virgin Atlantic, one of several spurned suitors, noted that those airports offered far more runway capacity enabling competing airlines to challenge on individual routes.

For Walsh the extra slots will enable BA to develop, if it wants to, into China, India and perhaps South America without having to compromise on short haul.

AERBT will attempt to analyse the situation next week.  This involves not just BA and Lufthansa but Star Alliance, Heathrow T1, T3 and the future T2, Virgin and other potential purchasers, slot and route trade-offs, Government intervention (which will need to be seen in a positive light by all parties), and the staffing and pension consequences.  Will it prove financially manageable for IAG (BA)?  How it will affect bmi's commercial arrangements with other airlines and at the end of the day, and finally, what is in it for the passenger? www.iairgroup.com www.lufthansa.com

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