Virgin Atlantic expected to launch its bid for BMI
Virgin Atlantic chief: Battle to take over BMI very much still alive
Virgin Atlantic chief executive Steve Ridgway has said that International Airlines Group, owner of British Airways, will have a “massive competition mountain” to climb if it is to be successful in its bid for BMI.
Mr Ridgeway said it was difficult to see how regulators would pass any deal because there would be no competition on a number of routes from Heathrow. Virgin Atlantic is expected to launch its own bid for BMI following IAG’s £200m-£300m offer.
Mr Ridgeway will meet Lufthansa bosses on Thursday and is claiming that the battle to take over the carrier is very much still alive.
IAG announced on Friday that it has reached “agreement in principle” with the German airline to acquire BMI in a deal that would increase its share of Heathrow’s take-off and landing slots from 45pc to 53pc.
However, Mr Ridgway said in an interview with The Sunday Telegraph that Virgin Atlantic has been assured by Lufthansa that the sale process is far from sealed.
“I guess BA is trying to put a gloss on it,” he said. “But I don’t think they’re any further ahead than we are and they have a massive competition mountain to climb.
“There is no exclusivity and there is no binding deal. They have reached an agreement in principle. Both companies have put bids in and there’s a huge amount of work to do.
“We haven’t done formal due diligence yet; neither have they. That will start now. The big issue for IAG is how they are going to get this past the regulators because, on 60pc of the routes that BA and BMI fly together, there will be no competition. A lot of business people and travellers in the regions will be concerned. About 1.6m passengers every year connect through Heathrow just from Aberdeen, Manchester and Edinburgh and they will no longer have a choice if British Airways is successful because the only carrier on the route will be British Airways.”
IAG chief executive, Willie Walsh, has said that he is confident of securing approval for the BMI acquisition from regulators in the UK and Brussels.
He argues that Air France-KLM is already allowed to control 59pc of slots at the Charles de Gaulle airport in Paris and 57pc of slots at the Schiphol airport in Amsterdam.
However, Mr Ridgway argued: “I know Willie is peddling the line that there’s no problem with him having 53pc at Heathrow because it’s lower than some of his continental rivals but there’s no comparison.
“Frankfurt has just opened its fourth runway and Paris has got four runways. You can provide competition there. Heathrow is completely full. The Government has said it isn’t going to allow a third runway to be built and even Ed Miliband is saying that Labour is not going to support it now.
“British Airways on its own has more capacity and market share across the North Atlantic, which is still the world’s biggest market, than the whole of Skyteam in Paris or the Star team in Germany so they’re just comparing apples and pears.
“[BMI] want to do this to reduce competition and make sure Virgin Atlantic doesn’t get it but it is consumers that will pay the price for that.
“The regulators have got a massive challenge here about whether they even entertain this, with its reduction in potential competition and I think they are going to have to look at it not only on a market-by-market basis out of Heathrow but on this bank of slots as the last chance to preserve significant and decent competition to British Airways.”
Mr Ridgway will this week announce that Virgin is to start flying from Heathrow to Vancouver in May.
The four-days-a-week service, together with an already-announced new service from Gatwick to Cancun, Mexico, will take Virgin’s number of routes up to a record 34.
The airline will also put on an extra three flights a week from Heathrow to San Francisco, which it currently serves with a single daily flight.
Earlier this year, Virgin launched flights from Manchester to Las Vegas,.
BMI, however, remains the last chance of Virgin significantly increasing its current 3pc of Heathrow slots.
“It’s a complex transaction,” said Mr Ridgway. “There’s a lot more analysis that needs doing. It’s a key moment in UK aviation history given that Heathrow is full.
“Both processes are at a very similar point. We have sent Lufthansa a bid and they have responded to it and that’s where we are in terms of the structure of a deal.
“We’ve got to complete more aspects of it, just as BA has and I think that will probably happen quite quickly because it’s clear that Lufthansa wants to move fairly fast.”