Lufthansa takes the fight to BA - assumes command of bmi

In a process of continuous consolidation currently gripping the global airline industry, British carrier bmi is now being taken over by German flag carrier Lufthansa. The acquisition, in particular, adds momentum to the consolidation process already sweeping across the European airline industry.

Lufthansa has acquired the 50% share owned by bmi chairman Sir Michael Bishop, taking its overall holding to 80%. It already owns just under 30%. The remaining 20% is owned by Sweden-based Scandinavian Airlines, which has said it also wants to sell.

The deal will move Lufthansa into the second spot behind British Airways at London Heathrow for takeoff and landing slots. bmi holds 11.4% of the Heathrow slots second only to BA's 41.5%. A  greater presence at Heathrow will allow Lufthansa to effectively challenge BA for a share of the profitable transatlantic routes.

Virgin Atlantic owner Sir Richard Branson responded to the purchase immediately by offering to combine its own operations with Lufthansa's in a partnership that could create Europe's dominant airline and also a major rival to BA.

"Michael Bishop is one of the icons of UK aviation. He has been a considerable force in championing the cause of the consumer and, along with Virgin Atlantic, has helped to provide much-needed competition to BA and choice for consumers," said Steve Ridgway, the chief executive of Virgin Atlantic.

"Now we are about to enter the next phase of bmi's future and a turning point in aviation. Everyone has speculated that it would make sense for Virgin Atlantic and BMI to combine their long-haul and short-haul networks. There is now a major opportunity to do that and create a new and even more effective competitor to BA.

"I am sure that Lufthansa realise the future opportunities and this could be a really good example of the right industry consolidation. It would be good for consumers, for UK plc and European aviation's competitiveness."

Earlier this year, Lufthansa took a 45% stake in Brussels Airlines, with the option for an outright purchase of the carrier by 2011. It is also eyeing stakes in Austrian Airways and Italy's Alitalia.

Meanwhile, as part of its Q3 results Lufthansa said bmi owner Sir Michael Bishop exercised a "put option" for his stake of 50%, plus one share, in bmi on 10 October. It said the transaction is expected to be complete by 12 January.

Lufthansa said in a results statement today that Sir Michael Bishop, the chairman of bmi, had exercised an option to sell his 50 per cent plus one share stake in the airline and the deal is expected to complete on 12 January.

Lufthansa had bought a 30 per cent stake in bmi in 1999.