In a £30 million deal, Bmi has taken over British Mediterranean (Bmed), a franchise partner of British Airways.
It's good news for the Star Alliance carriers and their loyalty club (FFP) members. All will enjoy a boosted presence at Heathrow with greater FFP opportunities. But it's not such good news for BA and its Oneworld members who now see a hole in their network with reduced FFP benefits.
Bmed specialises in serving a range of destinations in the Middle and Near East, Africa and Russia on behalf of BA. The cities include Ekaterinburg (Russia) and Ankara in addition to Almaty (Kazakhstan), Beirut, Amman, Teheran and Khartoum among others. It operates a fleet of eight narrow-bodied Airbus A320 and A321s in a two-class (business and economy) configuration. Before the takeover Bmed had a number of backers including a large shareholding from Syrian financier Wafic Said.
Bmed became a BA franchise in 1997. In previous years the carrier was profitable. But more recently it has been hit by higher oil prices and the conflict in the Lebanon which affected passenger numbers.
According to a report in The Daily Telegraph, Bmed is set to lose £21 million in this financial year. Part of the loss includes the franchise fee of three per cent of turnover payable to BA for the right to use its livery, airport facilities, booking systems and so on.
The agreement struck between Bmi and Bmed specifies that Bmed's existing routes and schedules will be retained during a transitionary period until the end of the summer season. It is not clear at this stage which Bmed routes will be honoured by Bmi. Neither is it known whether BA will decide to take over the routes which will be dropped by Bmi.
Bmi chairman Sir Michael Bishop, CEO Nigel Turner and deputy CEO Tim Bye have been appointed to the Bmed board with immediate effect. David Richardson will retain his position as Bmed chief executive reporting to Nigel Turner. All existing non-executive directors of Bmed have resigned.
Taking over Bmed will allow Bmi to fuel its expansion plans - Bmi is keen to develop more routes to the Middle East and Russia.
Currently Bmed provides BA and other Oneworld members with millions of pounds worth of connecting passengers at Heathrow and vice versa. Following the changeover it's reasonable to assume that Bmi will be feeding Star member carriers at Heathrow.
Report by Alex McWhirter