Lufthansa Wants to Sell BMIBack to Forum
Anonymous1 Sep 2011
It seems Lufthansa has had enough of the massive losses at BMI.
I’ve not seen this on any English language news site yet.
Maybe BA will be a buyer, pull out of Gatwick and consolidate at LHR, or maybe they will be blocked due to competition reasons.
Maybe AF-KLM will buy to have a Skyteam presence in the UK.
Thoughts anyone?1 Sep 2011
Hi Bucksnet, This rumor has been around a few times, but this looks more ‘official.’ Whilst a purchase by BA would give BA an even greater share of LHR slots, the percentage would pale in comparison to AF/KL at either CDG/AMS, LH at FRA/MUC, and almost any other flag/main carrier at their home base (s). The main challenge to such a purchase would come from UK Competition regulators as you say, with a hefty fight from VS no doubt as well.1 Sep 2011
I wonder just how true this is ?
I ask, because, today there have been a number of contradictory reports in the press both in German and English language.
See :1 Sep 2011
Yes, BA’s main competitors do have a much greater share of slots at their home base, so maybe they should be allowed to acquire BMI to get a more level playing field.1 Sep 2011
LondonCity, producing a long term business plan to attempt to return to profitability does not mean Lufthansa wish to keep BMI. It might just be part of the sale process to increase the price by proving to a buyer that it has a viable future.1 Sep 2011
In the midst of this, BD are introducing a new service from EMA-FRA!
Clearly a new BD strategy is needed as they seem to have been floundering for about ten years, about the same time as they became BMI! I can’t help but wonder if there is any sense in them focussing again on key European routes particularly where there is no *A presence and providing a proper interlined connections service to *A partners out of LHR which is something they have never done. They almost operate like a stand alone and in the current world, they are not big enough to do that.
It’s difficult to believe they were losing so much money on LHR-GLA as there were never any seats. The one thing they do seem to have done successfully for years is kill routes by reducing frequencies and offering services at times that were no use to business travellers and then were surprised that they could only sell cheap tickets.
When will they wake up at Donnington Hall??1 Sep 2011
It would be interesting to see how the competition authorities would reason should BA acquire all or a substantial share of BMI’s slots. Given BMI’s withdrawal from domestic and short-haul European routes, BA and BMI now only compete head to head on 10 routes ex LHR.
Three of these are in conjunction with other LH companies:
BSL, TXL and VIE
Three are domestic:
ABZ, MAN, EDI
And four are Europe or Middle East
CAI, MOW, NCE, RUH
In terms of direct head to head competition I can only see the competition authorities having a serious problem with lack of competition on the LHR domestic routes. However, BMI’s recent withdrawal from GLA shows that their continued operation is no longer assured (BFS included).
It is also difficult to gauge at what % level of slot dominance the authorities would reason that BA should stopped. Compared to LH, AF and KL’s positions in their respective hubs BA seems to have a certain amount of upside. Indeed London is much more competitive than AMS, PAR and FRA given the existence of four other major London airports.
It’s difficult to see how BMI can of any strategic interest to other airlines in its current form. Virgin Atlantic surely does not possess the financial muscle to purchase. Surely retaining a certain amount of slots for LH companies expansion and then selling the remainder to other bidders including BA and VS would maximise value for LH.1 Sep 2011
Can’t see Virgin bidding for BMI – don’t think they have the cash. Moreover, BMI doesn’t fit with the point to point model for VS. Suspect that Virgin will kick up a fuss if BA puts a bid in, but realistically there aren’t going to be many other players. Only other hope is for a management buy out. Suspect that the competition commission would allow a bid by BA if the alternative was BMI going bust.1 Sep 2011
Virgin has made a lot of noise about doing a deal but nothing has come of it. LH would want cash for BD whereas the typical Virgin model is to license their brand and/or sell an existing Virgin business in return for an equity stake.
The only realistic options I foresee are:
1. IAG buys BD with LH keeping back some slots
2. LH significantly downsizes BD, and sells its slots with, save for the really lucrative departure/arrival slots, IAG being the only realistic buyer for most of the slots.1 Sep 2011
This is old news.
WW has stated publicly he would like to buy bmi for the slots alone, and while they won’t be able to afford them all, I can see them bidding for a fair few (and possibly some of the aircraft, too).
All those A319s would go well at Gatwick.1 Sep 2011
Speculation regarding BMI and BA’s potential role as a buyer is old news. However, BMI’s route network has changed so much in the last 18-24 months that how BA’s purchase of BMI’s slots would be perceived by the competition authorities is now probably less clear cut. BMI no longer competes with BA on a range of routes from LHR: incl. GLA, CDG, AMS etc. This will naturally make the authorities analysis tougher since BA and BMI now only compete directly on a handful of routes (see my previous post). In other words LH’s restructuring of the BMI network might make it easier for BA to purchase a larger share of BMI’s aircraft and slots.
Indeed if BA was to use BMI slots to open i.e. new Asian (China, Korea, Far East) destinations it would strengthen BA’s position compared to LH and AF/KL thereby increasing competition on long-haul routes to and from Europe.1 Sep 2011
In response to the “lack of financial muscle” argument please see this article (http://www.travelweekly.co.uk/Articles/2011/08/10/37902/virgin-atlantic-returns-to-profit.html) which states that Virgin is now profitable and it seems also has around £500m in cash.
Surely a troubled BMI is not worth much more than that?1 Sep 2011
“WW has stated publicly he would like to buy bmi for the slots alone, and while they won’t be able to afford them all, I can see them bidding for a fair few (and possibly some of the aircraft, too).”
Sometimes, you are so far off the mark that it makes my toes curl.1 Sep 2011