Lufthansa mulling BMI sale after just two years

Steve Dinneen
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ONE of Heathrow’s heaviest runway users, BMI British Midland, could be sold by its German owners after its losses widened.

A Lufthansa spokesman told City A.M. the company was “exploring options, which could include a sale or partnership”. He added that the process is at “a very early stage”.

BMI lost £54m in its first quarter – equivalent to £38 for every passenger – putting it on course for a much wider loss than the £125m it lost in 2010.

The scale of the losses have spurred its owner into action, with the German operator appointing Morgan Stanley to advise it on its options.

Sources close to the company told City A.M. a full sale is on the cards, along with a strategic partnership or a break-up of the firm’s assets.

Both British Airways and Virgin have expressed an interest in the business in recent months, making them frontrunners in any potential deal.

BMI is seen as a prized asset because of the high number of runway slots it commands at Heathrow – 10 per cent of the total available. The runway slots alone were valued at £770m back in 2008.

For this reason it has also been linked to Middle Eastern airlines such as Abu Dhabi’s Etihad, which is keen to expand its influence at the airport.

However, sources told City A.M. the disposal could be hindered by the macroeconomic climate, with the price of oil being high and the outlook for the UK economy driving down BMI’s value.

Lufthansa took over the struggling business just two years ago from Sir Michael Bishop.

Since then it has been hit by difficult trading conditions, most recently the uprising in the Middle East, which has dented demand for flights to the region, making a turnaround of the loss-making airline all the more difficult.