Chocks away! IAG get EC OK for BMI

The much-anticipated takeover of BMI by mega-airline IAG has been cleared for takeoff by the EC.

by Andrew Saunders
Last Updated: 09 Nov 2012
Competition concerns from Brussels were the last hurdle that the £172.5m deal had to negotiate, so this approval means that BMI will now join the IAG stable, already comprising BA and Iberia. IAG boss and mastermind of the takeover Willie Walsh declared himself delighted with the outcome, adding that IAG ‘now had the opportunity to really fulfil the extra potential we’ve always believed existed at Heathrow'.
 
And he has good reason to be pleased. Although the EC regulators required that BA surrender 14 landing slot pairs at Heathrow as part of the approval process, the airline still ends up with an aggregate gain of 42 new landing slot pairs at the capital’s main airport. That sort of additional capacity is rarely available at any price: Heathrow is, as regular users will attest, full to bursting with aircraft movements so new slots cannot be created, they can only be acquired from an existing holder.
 
In other words, what he’s really buying in strategic terms is 42 extra slots at around £4m a pop. The fact that there is a small and struggling airline included in the deal is of decidedly secondary importance. BA was already the dominant operator at Heathrow, now its position could be described as commanding.
 
That fact can hardly be helping BMI’s 2,000 plus employees sleep soundly at night, but Walsh reckons the deal will save as many jobs as possible, although he is not committing to any numbers on that front. The reality is that redundancies are on the cards.
 
One person who will not be having a good start to the week is Richard Branson at Virgin Atlantic. He was also interested in buying BMI from Lufthansa, but was beaten to the punch by IAG. His last hope of getting a sniff of the action now seems to have gone. Even Ryanair has weighed in, saying that it was unfair that IAGs takeover seemed to have been treated differently in competition terms from the attempt by Ryanair to buy Aer Lingus back in 2006. Who’d be a regulator?
 
The deal is a vital plank in Walsh’s grand consolidation strategy, because without those extra slots the wings of IAG’s potential for expansion would be seriously clipped. So what’s IAG going to do with BMI? For the time being it has said it will continue to operate BMI’s scheduled services, but in the medium term its eyes are on long haul expansion, using those shiny new slots to send planes packed with lucrative business travellers to the emerging markets.
 
IAG will also be code-sharing on BMI flights with rival airlines, including Virgin, Walsh couldn’t resist one more dig at Branson, saying ‘It must be humiliating for Virgin and Branson to have to rely on the BA network to feed their traffic’. Now now, play nicely, boys. 

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