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At last. According to Sky News just now, BA/IAG has proposed a deal to takeover BMI.
What will the new terminal arrangements be at LHR?
Will there be a counter offer from Branson? Does he have the money? Will he object?
Bucksnet, I think there is one important distinction. It says the owner of BA not BA. So there could be an option for BMI to be run as a separate concern with separate service levels for passengers and separate terms and conditions for staff. This could be a way to perhaps a bridge business model for certain destinations, not Lo Cost but no frills enough to compete, given acces to One World miles etc..
http://blogs.news.sky.com/kleinman/Post:8c335dc4-49f0-4334-9cb6-db90b7f450e0
It seems to be at an early stage so might not materialise. Interesting to see if Virgin will now come with a public offer or response!
@ Rich
For bmi to be made profitable, I think it would need to be fully integrated into BA with a subsequent reallocation of slots and aircraft.
I was looking at the bigger picture Sacndinavian but you are probably right looking at BMI alone. My thoughts were along the lines that BA is composed of two primary carriers with two market types and two brand images. There is the global longhaul BOAC with First Class and high loevels of service and there is the fundamentally Domestic and European Short Haul BEA with a much more limted service offering competing with many more low cost carriers. The combinig of these two airlines brought cost savings but I think has caused some of their loss of focus. Now you have IB in the picture as well with separate Brand issues. My thoughts were this maybe an opportunity to fundamentally restructure the business rather than trying to prop up non profit making segments in the current structure. I guess it deoends what the motivation behind any acquisition would be. After all if it is just asset stripping then all bets are off.
The losses for bmi have been simply horrendous so, unfortunately, I don't see anything other than a very swift rebranding and integration of bmi into BA. Though, I suspect bmi will operate under its own operating certificate for some time.
This of course all assumes that any IAG bid is palatable for Lufthansa and any eventual deal is not blocked by regulators.
Virgin will of course be very vocal in its disapproval.
@Swissdiver The regulators will want to look at it but there's really no alternative [for bmi mainline].
Approval of the deal would also assuage BA/IAG's vocal dissatisfaction over UK aviation policy and the third runway.
I am unconvinced we have the rigth option. I know the Ba community will talk up their bid and the Virign community will continue to want a fire sale. Stelios was starting up a new airline, does he buy certain assets? From a business perspective much is made of the BMI pension fund, so I guess a question is can certain assets be purchased selectively? My personal view is that the passenger will be better served if BMI does not go to BA or Virgin as both moves would accelerate consolidation, remove choice and consequently competitiveness in the affected routes.
I think we can be sure there won't be a bid from Virgin but Branson will snipe on the sidelines as usual.
I think this is a huge mistake if it does go ahead and a lost opportunity for the Star Alliance they will never get again.
Let's hope this is blocked by the regulators, the last thing anyone needs is more BA consolidation at LHR.
To those that hold their noses at the thought of BA buying bmi, what do think the alternative is?
The (unconfirmed) bid has arisen because LH have decided to put the airline up for sale. bmi has, in terms of acquisition costs and subsequent losses, cost Lufthansa close to a billion pounds. And there is no sign of any turnaround with losses and decline in passenger numbers accelerating,
Save for an institutional investor, the only alternative, due to EU ownership rules is another EU airline and, well, look around, what do you see?
@Hippocampus: this could be common sense. But are the regulators always making sense...
@LPPSKrisflyer: The less Star Alliance out there the better of we are!
As discussed in an earlier thread there is actually very little direct competition nowadays between BA and bmi. Overlap is primarily on ABZ, EDI and MAN, routes where bmi has lately reduced capacity. The Lufthansa Group could be expected to take over bmi's current limited production on routes between LHR and their main hubs.
This means that the regulators angle must be that BA should not be allowed to hold more than X% of slots at LHR. Difficult to see how that would work given current competition levels at LHR plus from LCCs at the other London airports. Even without bmi the London market is much more competitive than any of the main European hub cities.
The biggest loss for Star Alliance would be not having a local carrier in London. Without bmi there will be no UK Star partner to push a local Star affiliated frequent flier programme. A possible outcome is that Lufthansa retain and integrate bmi's diamond club programme and database instead of selling it to BA in order to maintain a strong Star position in London.
The same applies for corporate agreements. Star carriers would have to better coordinate their corporate agreements and sales efforts without bmi to spearhead negotiations and so forth. Once again Lufthansa/United could take the lead role here in terms of multilateral Star corporate agreements.
If a BA/bmi agreement did go ahead then regulators might demand that BA offers Star carriers interline pricing agreements as competitive as those it has with its fellow oneworld carriers, especially on the UK domestic routes bmi currently offers. This would ensure pricing neutral feed into London. Apparently Star carriers offering BA connections to LHR from GLA have become very uncompetitive since bmi closed GLA.
I think Hippocampus is right regards London capacity. If BA were to integrate bmi then I think they would become less vocal about a third runway (for a time).
Whatever happens - it is all very exciting!
So Hippocampus what happens if the regulators say fine to BA taking over BMI but they have to give up the extra landing slots, as has happened in prior mergers where share of trade was a concern? Would BA still move forward or just reach out to their "friends"?
@RichHI1 It really depends on what slot divesutures would be required and how specific these are. A small number of slots at off peak times would not be a problem. A more significant number including slots suitable for lucrative long haul routes would be a problem, not least with the bmi deal carrying significant risk.
As BA partners in one way or another with so many Oneworld partners I assume slots would have to be disposed to non-Oneworld airlines.
Yes I think so, may be UAL back to JFK again although thye now have EWR, maybe Delta would also be looking for something. We have heard a lot about Chinese opportunities, maybe they too would be lining up for slots for new flights from PRC?
Would divestiture be necessary? Even with buying BMI, would BA's slot control at LHR be less than LH / KL / AF at their own hubs? I think the competition commission would look odd if they blocked it.
I do not think they would block it but I would see it unlikely that they would not demand some divestiture. If it rested solely with the Uk GOvernment I am sure a deal would be done over dinner but the EU will be looking to balance the interests of Euroepan cnsumers and airlines as well. If it were a BMI BA merger then things might be different.
I think the UK competition authorities blocking such a deal seems highly likely, unless there is high-level corruption present. I only say this because the government here is much more stringent in adhering to free-market policies, a related example being the break-up of the BAA monopoly. This may well be VA's one and only successful lobby.
Another point: whoever said that there is not significant overlap is talking rubbish, here's at least ten routeS on which BMI competes with BA or CityFlyer: ABZ,BSL,BHD,CAI,EDI,HAM,JED,DME,MAN,RAK,MXP,NCE,RUH,VIE.
That to me equals major competition!
And on how many of those routes are BA and bmi the sole operators to LHR?
Answer: Not very many.
Plus there is plenty of competitions from LCCs operating in other London airports and from train operators on domestic routes.
There is no alternative to BA merging with BD. If Lufthansa, one of the best managed airline groups in the world, can't make a go of bmi as a standalone airline, then no-one else can.
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