Branson: IAG/bmi deal Virgin on the ridiculous

IAG, the BA-Iberia tie-up, says it's going to buy bmi off Lufthansa. Although Richard Branson isn't happy.

by Emma Haslett
Last Updated: 09 Nov 2012
International Airlines Group, the tie-up between British Airways and Iberia, has just bought itself an early Christmas present: it’s agreed a deal which means it will buy struggling airline bmi off German flag-carrier Lufthansa for £172.5m. That’s good news for Lufthansa, which has been desperate to sell the airline after it made a £153m loss in the year to 2010; and it’s great news for IAG, which will get 56 extra landing slots at Heathrow. So even if you assume the rest of the airline is worthless, at £3.1m per slot, that’s not a bad price. Virgin, on the other hand, is dead set against it…

You can see why IAG is so keen on taking on bmi – after all, it has 8.5% of landing slots at Heathrow, and to sweeten the deal even further, Lufthansa said it didn’t have to buy its subsidiaries bmi regional or bmibaby, which it would sell off separately. IAG said it was hoping to complete the deal in the first three months of next year. All in all, added CEO Willie Walsh, it’s ‘good news for the UK’.

There are, of course, two caveats. To begin with, the Leicestershire-based airline comes with more than 3,600 staff – and given the scale of those losses, Walsh said that ‘there is an urgent need to restructure the business’. Of course, that will mean job losses – but Walsh was keen to point out that ‘we will secure a significant number of high quality jobs here in the UK and create similar new jobs in the future’. Although that probably won’t come as much comfort to those who find themselves without a job at the end of the process. Although Walsh’s survival strategy seems to be consolidation, so don’t be surprised if more such deals come along next year…

The other problem is competition – namely, Virgin Atlantic, which said in no uncertain terms that it’s going to demand authorities call a halt to the deal. ‘This deal simply cuts consumer choice and screws the travelling public,’ argued an outraged Richard Branson. ‘BA is already dominant at Heathrow and their removal of bmi just tightens their stranglehold 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.’

Fighting talk, that – although to be fair, Virgin’s protests throughout BA’s tie-up with Iberia were resolutely ignored by the Competition Commission. And at a time when the Government is, in all likelihoods, more worried about saving jobs than creating competition, we’re not holding our breath that their reaction this time will be any different…

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