BMI being taken over by Lufthansa

BMI is Heathrow's second-biggest airline

UK airline BMI is being taken over by Germany's Lufthansa.

Lufthansa is buying the 50% of firm owned by BMI chairman Sir Michael Bishop, who forced the purchase under a long-standing agreement.

The German carrier was already BMI's second-largest shareholder, with a stake of 30% minus one share.

The deal will give Lufthansa control of more flights from London Heathrow airport than any other airline except British Airways.

BMI 10.6 million passengers last year Flies to 51 destinations 54 planes

Lufthansa accepted that the deal would have an impact on competition at the UK's largest airport, but said it was for competition authorities to make a decision on whether to approve the deal.

The deal is set to be completed by 16 January - but the German firm would not confirm what it was paying for Sir Michael's stake. Reports suggest it is about £318m.

BA competition

The German airline signed an agreement with Sir Michael in 1999 that if he ever wanted to sell his BMI stake, it would make the purchase.

There had been growing speculation in recent months that Sir Michael was keen to sell his share in the business.

Lufthansa, which on Tuesday announced its third-quarter net profit had fallen by 75%, said it would "have to deal with" Sir Michael's decision, which vice president for Europe, Karsten Benz, told the BBC "was not a surprise".

LUFTHANSA 63 million passengers last year Flies to 194 destinations 281 planes

There has been speculation that parts of the BMI business will be sold off.

But Lufthansa refused to comment on Virgin Atlantic's suggestion that that BMI and Virgin combine their short-haul and long-haul networks.

There would be no job cuts at BMI "for the time being" Mr Benz added, saying Lufthansa had successfully integrated Swiss Airlines into the business and was confident of doing the same with BMI.

Sector under pressure

BMI flew 10.6 million passengers last year and operates 54 aircraft. It controls 11% of landing and take-off slots at Heathrow.

Its two main hubs are Heathrow and Manchester, but it also operates from 13 other UK airports.

The remaining 20% of BMI is currently owned by Sweden-based Scandinavian Airlines (SAS).

Industry observers say the Lufthansa-BMI deal considerably bolsters the German carrier's position at Heathrow, where BA is planning to form an alliance with American Airlines.

Lufthansa is Germany's largest airline

Like almost all airlines, BMI has seen its profits hit this year by the big rises in the price of aviation fuel in the first half of the year.

Rising fuel costs have led to a number of carriers seeking closer ties with rivals, such as British Airways' plans for a tie-up with American Airlines.

Other airlines have had to cease operations, including Zoom, XL and Sterling.

Analysts said Lufthansa's relative financial strength, combined with the current troubles in the airline industry, meant it had been able to go on something of a bargain-hunting spending spree.

Earlier this year, Lufthansa had bought a 45% stake in Brussels Airlines.

Lufthansa blamed its 75% fall in net profit for the July to September period on higher fuel costs.

However, aviation fuel is now falling in price as it trails the recent sharp declines in crude oil costs.

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