Virgin ready to gate-crash BA’s BMI bid to clinch slots at Heathrow

SIR Richard Branson’s Virgin Atlantic has gate-crashed rival British Airways’ deal to buy BMI from Lufthansa, agreeing a counter-bid it hopes will appeal more to regulators.

IAG, which owns BA and Spanish carrier Iberia, last month revealed it had reached an agreement in principle to buy BMI, lured by its coveted slots at Heathrow airport.

Yet a spokeswoman for Luft-hansa yesterday said it had also reached an agreement in principle for the sale of BMI to Virgin, which said last month it was still in talks with the German carrier.

She added that Germany’s biggest carrier hoped to sign a final deal in the next few weeks, with completion seen in the first quarter of 2012.

“We will look at the quality of the offers and which one gives the most attractive prospects for the future of BMI,” she said, declining to provide further details of the bids or to say which bid Lufthansa preferred.

A sale to Virgin could be a smart move for Lufthansa, analysts say, as it would probably involve less regulatory scrutiny and also prevent BMI falling into the hands of BA, its strongest competitor.

A source close to the talks said Virgin had outlined the details of a bid, which was satisfactory to Lufthansa, and that the German carrier had opened BMI’s books to Virgin.

“IAG’s offer will be larger than Virgin’s in financial terms because they have the deeper pockets, but Virgin hopes its offer will be more compelling because it is more straightforward with the likelihood of less regulatory issues cropping up than would be the case with IAG’s bid,” the source said.

BMI’s key attraction is that it controls 9 per cent of the take-off and landing slots at Heathrow, Europe’s busiest airport, which is operating at full capacity after plans to build a third runway were scrapped.

IAG, which already holds 43.1 per cent of the slots at Heathrow, would hold around 52 per cent of the hub’s slots if its bid for BMI succeeds.

Virgin has written to the Office of Fair Trading and the European Commission requesting the sale of BMI’s assets to be examined to ensure competition is not eroded.

However, IAG says its holding at Heathrow is small compared with rivals at other European hubs – Lufthansa holds two-thirds of the slots at Frankfurt, while Air France-KLM has 59 per cent at Charles de Gaulle in Paris and 57 per cent at Amsterdam’s Schiphol.

But a Virgin spokeswoman said: “British Airways’ hold over Heathrow is already too dominant and we are very concerned, as the competition authorities should also be, that BA’s purchase of BMI would be disastrous for consumer choice and competition.”

Analysts estimate Virgin’s offer to be about £50 million, while IAG’s is double that figure, excluding pension and restructuring costs.