Virgin to appeal IAG’s purchase of Bmi

Virgin Atlantic says it will appeal against the European Commission’s decision to approve IAG’s purchase of Bmi from Lufthansa.

The Commission gave its approval for the deal last month (see online news March 30), in what Virgin called a “lightning speed decision”.

Sir Richard Branson said Virgin would “challenge every aspect of this process which if allowed to stand, will undoubtedly damage the British airline industry for years to come”, adding that the Commission had “seemingly ignored all of the strong cases made by politicians, business groups and airlines, to enable one big company to become even more bloated”.

Virgin confirmed it will bid to operate all of the 12 “remedy slots” given up by British Airways at Heathrow as part of IAG’s purchase, but said that “they alone are completely inadequate to address the damage which is being done by the deal”.

Branson also called for the remedy slots not to be broken up between more than one airline, warning that “You cannot provide serious competition in a piecemeal way and we believe it is crucial to use the slots together to create some sort of critical mass with a strong message to the consumer”.

At the time of the Commission’s approval, IAG said it expected the deal to completed around April 20.

Since then BA has started to sell flights for several Bmi destinations on its website (see online news April 4), and last week Bmi announced that Diamond Club members would no longer be able to earn or redeem miles on Lufthansa Group Airlines from April 19.

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Report by Mark Caswell

Airlines’ dismay at Treasury APD statement

The bosses of Easyjet, Ryanair, IAG and Virgin have called the government’s response to the consultation on reform of Air Passenger Duty “a sham and a waste of taxpayers’ money”.

The Treasury has today released a response to the recent consultation on the reform of APD, confirming the decision made in the Chancellor’s Autumn Statement that next year’s double increase will go ahead (see online news November 29).

The 27-page document states the consultation received over 500 responses from the aviation sector, domestic and international tourism, other business sectors and consumers. The Treasury said that the consultation “raised a number of specific questions on the future structure of APD, whilst stressing the need to maintain revenues from the aviation sector”.

The response highlights changes to the tax including its extension to include business jets, and the cut in rates for passengers departing airports in Northern Ireland.

However no changes have been made to the current banding structure depending on distance travelled, variations in the charge for regional airports, or the treatment of premium economy passengers within the higher rate of APD. On the latter point, the Treasury stated that:

“Any attempt to define premium economy for taxation purposes would… increase the complexity of the tax. This would also lead to greater administrative burdens for both the industry and HMRC. In addition, the Government notes that any attempt to define premium economy by seat pitch would inevitably discriminate between similar products offered by different airlines, including some and excluding others.”

In response the CEOs of Easyjet, Ryanair, IAG and Virgin have released the following joint statement:

“The Government’s consultation on APD has been a sham and a waste of taxpayers’ money.

“We are left with a tax that has already cost 25,000 jobs, is doing increasing damage to the prospects for economic recovery – and sends a message to the world that Britain is a difficult and expensive place to do business.

“We are united in calling for the Government to commission an independent study of APD’s overall economic value and impact. We have no doubt this would confirm that APD’s negative effect on UK GDP significantly outweighs its revenue benefit for the Treasury.

“EasyJet, IAG, Ryanair and Virgin Atlantic call for this tax on passengers to be axed.”

In addition British Airways has released its own statement, saying that the confirmation of the rises next year “is completely at odds with the Government’s declared aim of creating the foundations for growth”.

The carrier said that the hikes meant it would have to halve its plans to create 800 new jobs next year, and that it would also have to postpone plans to bring an extra Boeing 747 into service next summer.

To read the HM Treasury’s statement in full, click here.

IAG reaches “agreement in principle” to buy Bmi

The holding company for merged airlines British Airways and Iberia has reached an agreement in principle with Lufthansa for the sale of loss-making carrier Bmi.

In a statement IAG said that “The sale and closing of the deal remain subject to conditions including a binding purchase agreement, further due diligence and regulatory clearances”, and added that it “envisaged that the purchase agreement will be signed in the coming weeks and the aim is for the transaction to be completed in the first quarter of 2012”.

However Virgin Atlantic has also released a statement saying that it too has made a bid for Bmi, and says that it is “working with Lufthansa on the next stage of the purchase”.

The carrier said it “remains committed to the acquisition of BMI and believe that our offer will lead to the best outcome for the millions of consumers that fly in and out of Heathrow every year”.

Virgin also claimed that “British Airways’ hold over Heathrow is already too dominant  and we are very concerned – as the competition authorities should also be – that BA’s purchase of BMI would be disastrous for consumer choice and competition”.

Today’s news follows last week’s announcement that Bmi is in “advanced discussion” to sell its Aberdeen-based subsidiary Bmi Regional to a UK-based investor (see online news October 28).

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Report by Mark Caswell

BA and Iberia “won’t be the last” airlines within IAG

Willie Walsh said today that the merger of BA and Iberia under the International Airlines Group is “the first step towards creating a multinational multi-brand airline group”.

IAG’s chairman Antonio Vázquez and chief executive Willie Walsh were at the London Stock Exchange this morning to witness the start of trading of shares in the holding company for the newly merged Iberia and British Airways.

Speaking at the launch Walsh said:

“British Airways and Iberia are the first two airlines in IAG but they won’t be the last. Our goal is for more airlines – but, importantly, the right airlines – to join the group. Today is the first step towards creating a multinational multi-brand airline group”.

Walsh added that the merger will see the two carriers “retain their strong brands”, with complementary networks that operate from “two of the biggest hubs in Europe”. The agreement is expected to lead to annual synergies of €400 million from year five.

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