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  • IAG Buys BMI - The Regulatory Hurdle Comes Next
    Posted by Rupa Haria 9:50 AM on Dec 22, 2011

    The news that IAG, parent of British Airways and Iberia, will buy BMI from Lufthansa in a deal worth £172.5 million ($271m), comes with a clause attached. 

    Regulatory approval will need to be sought from the European Commission as BA’s slots at London Heathrow airport would increase to around 50% from its current 42% - up to 56 additional daily slot pairs. The airline’s dominant position at Heathrow is comparable to that of Air France-KLM at Paris and Amsterdam and Lufthansa at Frankfurt and Munich.

    But rival bidder, Virgin Atlantic, has already vowed to fight the deal, with Sir Richard Branson today saying: "This deal simply cuts consumer choice and screws the travelling public. BA is already dominant at Heathrow and their removal of BMI just tightens their stanglehold at the world's busiest international airport. We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry and bad for Britain."

    If the deal is not granted regulatory approval by the EC by the end of March 2012, IAG is subject to a terminal fee of £10 million ($15.7m), payable to Lufthansa. For its part, IAG says it hopes to complete the transaction during Q1 2012, but that timeframe will of course be determined by the European Commission.

    IAG has also warned that job cuts are likely. “Given the scale of bmi’s losses, there is an urgent need to restructure the business. Unfortunately, this will mean some job losses but we will secure a significant number of high quality jobs here in the UK and create similar new jobs in the future.”

    But IAG says that more British jobs will be protected than if Lufthansa had closed the loss-making airline. BMI employs more than 3,600 staff. The airline made a pre-tax loss of £153 million in 2010.

     

    Tags: tw99, bmi, iag, lufthansa

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