BA Talking With Lufthansa About Buying Bmi

British Airways chief executive Willie Walsh yesterday confirmed persistent media rumors that the airline is interested in buying its smaller rival Bmi British Midland. "We would be interested," Walsh told the London Evening Standard. "Something will happen, although Lufthansa wants to weigh up all the options before deciding. We have told them our position."

In June, an out-of-court settlement with Bmi chairman Sir Michael Bishop obliged Lufthansa to honor a decade-old commitment to buy his stake in the airline of 50 percent and one share. Lufthansa already held a 30 percent share and also is committed to buying out the remaining 20 percent owned by Scandinavian airline SAS.

Lufthansa paid Bishop £223 million as part of the settlement and it is believed shareholders are anxious to recoup at least some of the money. However, although Bmi owns 11 percent of the slots at London Heathrow, where restricted capacity makes them highly coveted, few airlines are in an expansionist mood in the present economic climate.

Nevertheless, media reports have indicated that 12 airlines have come forward to inspect the books of Bmi with a view to a part or whole purchase. Other than BA, only Virgin Atlantic has declared an interest publicly.

A spokesman for Lufthansa told EuroBTN that the airline has genuinely not decided what to do yet with Bmi. "We are looking into all options, ranging from the possibility of Bmi being part of Lufthansa to it not being part of Lufthansa," he said. "The aim at the moment is to turn around the management of the airline." The managing director and commercial director of Bmi's mainline business left the company at the end of August.

There have been suggestions that Lufthansa might perform an asset-stripping exercise by selling off Bmi's Heathrow slots piecemeal to a large number of different airlines, but the German flag-carrier indicated to EuroBTN that this would not be an acceptable option.