International Airlines Group today clinched a £172.5 million “binding agreement” to acquire BMI from Lufthansa.
The deal, which will come as a major blow to rival bidder Virgin Atlantic, will see IAG’s take-off and landing slots at capacity-constrained Heathrow rise by 56 daily pairs.
Lufthansa has the option to sell BMI Regional and Bmibaby before completion of the deal with the British Airways and Iberia parent company.
BMI recored a pre-tax loss of £153 million in 2010. IAG chief executive Willie Walsh said: “Given the scale of BMI’s losses, there is an urgent need to restructure the business.
“Unfortunately, this will mean some job losses but we will secure a significant number of high quality jobs here in the UK and create similar new jobs in the future.
“IAG’s purchase of BMI will protect more British jobs than if the airline had been closed and had its Heathrow slots sold off.
“There will be restructuring costs spread over three years, but these will be significantly lower in total than BMI’s current annual losses.
“BMI Regional and Bmibaby are not part of our plans and Lufthansa has the option to sell them before completion,”
The deal is due to be completed during the first quarter of 2012 but is subject to regulatory clearance from the European Commission and other bodies.
Virgin is expected to lead opposition to BA increasing its monopoly hold on slots at its London base.
Walsh added: “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 long-haul routes to key trading nations while supporting our broad domestic and short-haul network.”
He claimed: “This deal is good news for the UK as we will maintain a comprehensive domestic schedule including Belfast.
“Our plans to expand our long-haul 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.”
IAG intends to finance the purchase from its own funds with £60 million of the price to be paid in four instalments to Lufthansa before completion. This amount will be secured by Heathrow slots, IAG said.
There is a termination fee of £10 million which is only payable by IAG if phase one EU regulatory approval is not achieved by March 31, 2012 and either party elects to terminate the sales purchase agreement.