Richard Branson furious as BA group wins £172m BMI bidding war

SIR Richard Branson, owner of Virgin Atlantic, yesterday vowed to fight “every step of the way” against the £172.5 million acquisition of struggling airline BMI by the owner of British Airways, as City analysts forecast the deal would be passed by regulators.

The fighting talk came after International Airlines Group (IAG), formed from the merger of BA with Spanish carrier Iberia in January, swooped to sharply solidify BA’s dominance at London Heathrow – one of the biggest airline hubs in the world.

The deal to take the loss-making BMI off German owner Lufthansa will give IAG up to 56 additional much-prized take-off and landing slots at the airport. Group chief executive Willie Walsh claimed it would form a platform for strong international long‑haul growth.

Virgin Atlantic had been keen to do its own deal over BMI, and Branson branded the rival transaction as creating a consumer‑unfriendly monopoly.

“Claiming that this deal is about new markets from Heathrow is a smokescreen,” Branson said. “This deal simply cuts consumer choice and screws the travelling public.

“BA is already dominant at Heathrow and their removal of BMI just tightens their stranglehold at the world’s busiest international airport. We will fight this monopoly every step of the way.”

However, Walsh dismissed the criticism saying it was “a single critic. We would expect noise like that to come from that source”.

Budget airline Ryanair also refused to back Branson. The Irish carrier issued a statement saying BA’s acquisition of BMI’s main business was “a further logical development” in the consolidation of Europe’s airline industry.

It said: “While the merger gives British Airways greater control over take-off and landing slots at one of Europe’s most congested airports, Ryanair believes that this merely reflects the already large concentration which Lufthansa has at Frankfurt Main and Air France has at Paris Charles de Gaulle.”

BMI’s ailing regional services arm and low-cost airline bmibaby are not included in the deal, and Walsh said the purchase price would be significantly reduced if Lufthansa had not sold them before it went through. On using the new slots to expand long-haul operations, he said: “The world is changing and the balance of economic power is shifting to the east. We don’t currently have enough connections to those markets.” However, Walsh confirmed that the takeover was bound to involve unspecified job losses given the scale of restructuring needed.

Douglas McNeill, transport analyst at broker Charles Stanley, said: “For IAG it makes excellent strategic sense. It gives them a major boost at Heathrow, which is their motor of profitability.

“I also think regulators will take a lenient view. Lufthansa can argue that BMI’s losses [£153m last year] are so big that the alternative to a deal is closure. And if BMI goes out of business that would be bad for competition.”

Shares in IAG closed up 3.3 per cent at 149.9p.