IAG, owner of British Airways, has now reached a “binding agreement” with BMI’s owner Lufthansa to buy the airline for £172.5m in cash.
BA is unlikely to retain the BMI brand or the low cost airline bmibaby. However, Lufthansa can sell the unit before completion of the main deal and the airline may prove attractive to another operator.
If Lufthansa does sell bmibaby the price BA is to pay for the main airline will be reduced.
The deal is subject to competition clearance. Virgin Atlantic based its proposed bid on the premise that it was less likely to need regulatory scrutiny and would not lead to BA dominating London Heathrow.
IAG chief executive Willie Walsh has stated previously that the group, which also owns Iberia, has aggressive expansion plans. He says of the BMI deal: “Our plans to expand our long haul network would guarantee growth by making Britain better able to compete on a global scale.
“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 says that there will be job losses due to restructuring and the deal is expected to be completed by the first quarter of next year.