International Airlines Group (IAG) and Germany’s flag carrier Lufthansa have reached a binding agreement for IAG to acquire UK-based airline British Midland Limited (bmi).
IAG will pay £172.5 million for bmi, which consists of three distinct business units—bmi mainline, bmi regional and bmibaby.
bmi mainline operates Airbus aircraft to destinations in the domestic UK market, Europe, the CIS states, the Middle East and Africa from London Heathrow. bmi regional operates an Embraer fleet and offers shorthaul flights within the UK and Europe from seven regional airports; while bmibaby operates Boeing aircraft and is a low-cost airline flying primarily out of East Midlands and Birmingham airports.
IAG said the deal would increase its Heathrow slot portfolio by up to 56 additional daily slot pairs, as well as increasing its 2015 operating profit target of €1.5 billion by more than €100 million. Restructuring costs will be spread over three years and will be significantly lower in total than bmi's current annual losses, the company said.
Willie Walsh, IAG’s chief executive, said: "Buying bmi's mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports. Using the slot portfolio more efficiently provides the option to launch new longhaul routes to key trading nations while supporting our broad domestic and shorthaul network.
"This deal is good news for the UK as we will maintain a comprehensive domestic schedule including Belfast. Our plans to expand our longhaul network would guarantee growth by making Britain better able to compete on a global scale. It will also help maximise Heathrow's position as a world class hub airport.
"Customers will benefit from access to new destinations, more convenient schedules, enhanced frequent flyer benefits and greater investment than had been possible for loss-making bmi.”
Walsh added that the bmi regional and bmibaby businesses are not part of IAG’s plans and that Lufthansa has the option to sell them before completion of the deal, which is expected in 2012, subject to competition clearance.
London, UK-based IAG is one of the world's largest airline groups with 348 aircraft flying to 200 destinations and carrying more than 50 million passengers each year. It is the third largest group in Europe and the sixth largest in the world, based on revenue. Formed in January 2011, IAG is the parent company of British Airways and Iberia.
