Tuesday, December 27, 2011

British Airways’ Owner Takes BMI under Wing

Christmas revelry for British Airways and bitter holidays for Virgin Atlantic! Well, that’s what seems to have been the consequence of International Airlines Group (IAG) outbidding Virgin Atlantic to acquire BMI from Lufthansa.

IAG, British Airways’ owner, made a successful bid of 172.5 million-pound ($271 million) to bring the loss-making venture under its wings. BMI is Heathrow airport's second largest airline and the acquisition of BMI will consolidate BA’s position as Heathrow’s most potent carrier, with its share rising from about 44% to 53%.

BMI also runs BMI regional and BMIBaby, a budget airline known to offer cheap flight tickets. IAG has emphasised it is only interested in BMI’s mainline business and also has warned Lufthansa to face “significant price reduction” if the German carrier is unable to find buyers for both units.

British Airways is one of Europe’s leading airlines and is known to offer connections to many destinations. With the acquisition of BMI, IAG will now look to exploit some of slots by offering more flights to Asia – Flights to Malaysia and Korea appear to be quite a possibility, apart from Indonesia and Vietnam. BA has never served South Korea’s Incheon airport and it stopped its flights to Malaysia in 2001 for more focus on Bangkok and Singapore.

Virgin Atlantic’s Sir Richard Branson, however, is not buying IAG’s plans of new Asian markets from Heathrow and calls them “smoke-screen.” He also hinted at the prospect of air tickets prices going up and cheap flights becoming rarity in case BA has monopoly on London Heathrow.

IAG has rubbished the claims.

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