Lufthansa To Take Controlling Stake In BMI

Lufthansa today disclosed that it will take an additional 50 percent stake in British Midland Airways, bringing its total interest in the carrier to about 80 percent.

Lufthansa chairman and CEO Wolfgang Mayrhuber in prepared remarks to analysts today said BMI chairman Michael Bishop on Oct. 10 "exercised an option obliging Lufthansa to buy half the equity plus one share of British Midland PLC."

Lufthansa said it has set aside €400 million for the transaction, which "is subject to antitrust approval and regulatory requirements."

Mayrhuber said he expects that option to become effective in January. Lufthansa already controls a nearly 30 percent stake in BMI, which stems back to a 1999 agreement. SAS Scandinavian Airlines controls the remaining 20 percent.

In a question-and-answer session this morning with aviation analysts, Mayrhuber said of BMI, "The original reason why we invested there was simply because of Heathrow. There was no thought it would be my baby or a regional operation. So we have all the balls in the air to play with it, and take the right decision moving forward. This will be something we focus on in the next month."

Mayrhuber said BMI controls roughly 12 percent of London Heathrow Airport's slots, though he noted congestion at the airport and a softening in slot prices.

"We make money flying to London," Mayrhuber said, "so I think there is an opportunity to turn around the company. However, I don't want to do guesswork now, because first of all we have to exercise the process jointly with the shareholders and the management and then we'll have the answers ready."