Virgin vows to fight on as BA wins BMI

Marion Dakers
SIR RICHARD Branson was left fuming yesterday after British Airways parent IAG pipped Virgin Atlantic to a deal to buy BMI for £172.5m.

Branson said IAG’s purchase of the loss-making airline “simply cuts consumer choice and screws the travelling public.

“BA is already dominant at Heathrow and their removal of BMI just tightens their stranglehold at the world’s busiest international airport.”

Virgin said it will ask competition bodies to look at blocking the deal. But analysts at Oriel said “the balance of probabilities is in favour of this [deal] being given the go-ahead”.

But budget carrier Ryanair said the sale was “a logical development in the consolidation of Europe’s major airlines”, venturing to contrast the deal with its own bid for Aer Lingus, which was stymied by competition concerns.

BMI, formerly British Midland, controls around nine per cent of the landing slots at close-to-capacity Heathrow. Virgin has three per cent, while IAG will control around 53 per cent after the deal.

Virgin waded back into BMI owner Lufthansa’s auction two weeks ago, offering less money but a deal it said would be better for competition.

But IAG yesterday tied up a binding agreement some three months before Lufthansa’s target date for a sale, winning 56 daily take-off and landing slots while getting Lufthansa to keep BMI’s defined benefit pensions liabilities.

IAG said it would restructure the firm over three years, with job losses expected, though costs linked to the overhaul will be less than the £153m a year currently lost by BMI.

Group chief Willie Walsh said IAG’s plans to use the new slots for long-haul routes will make Britain “better able to compete on a global scale”.

Lufthansa still has the option to sell BMI Regional and BMI Baby, as IAG has no plans to continue the brands.



ON the sale of British Midlands International to IAG, Lufthansa turned for legal advice to Baker & McKenzie, who fielded a team including London corporate partner Peter Strivens and Duesseldorf partner Soenke Becker.

Strivens heads Bakers’ telecommunication group, and has worked at the firm since 1982, becoming partner in 1990.

His recent work has included advising private equity firms Blackstone, CVC and Providence on their bid with France Telecom for a stake in Cesky Telecom, and helping the Turkish government on its privatisation of a 55 per cent interest in Turk Telekom for Saudi Oger.

On the opposite side of the table representing IAG was Slaughter and May, led by London corporate partner David Wittmann – a long-time adviser to the company.