There has only been one subject when airline and air travel people have got together over the last week or so and that is the new transatlantic bilateral arrangement between Europe and the United States which becomes effective next March.
There can be little doubt that the new agreement is the most important piece of international airline legislation during the last decade. March also coincides with the opening of BA”s exclusive T5 (to be followed by Skyteam”s exclusive T4 and Star Alliance”s equally exclusive T1). The Airbus A380 will have just struggled into service and the Boeing 787 will not be that far away.
According to The Times (and possibly a leaked piece by an interested party) bmi has received a number of approaches from airlines looking to buy out Sir Michael and his partners” 50% plus one share, the balance owned by Lufthansa (30%) and SAS (20%). The Times says that British Airways is considering a ”1 billion bid, but in the same piece puts a value of ”1.3bn on basket case Alitalia, ”3.7bn for Iberia and ”1.7bn for Aer Lingus, although with Ryanair”s offer last year, the figure does have some credibility.
Let us examine the facts. Bmi is only marginally profitable and is essentially a European airline (in effect competing with the new entry budget carriers with their cheap regional airport operations and low-cost structures). It has a very small international long-haul operation, of very good quality, which is building up experience. Its great virtue is the 13% of slots gained over the years at Heathrow, including the recent and shrewd purchase of BMED.
During a 40-year career Sir Michael Bishop has been extremely astute in expanding the airline, keeping what he deemed of value and disposing of the unnecessary. Out went Manx and what is now essentially Eastern Airways (via BA). Yes he has made his mistakes, London City Airways typically, but even with Docklands his judgement has proved right in the long run.
At 65 what does Sir Michael want to do? Retire, perhaps to Australia where he has family connections, or become more involved with the English National Opera and his other interests. He was also at one time chairman of Channel 4 TV.
Just suppose BA were to make a bid for bmi. The competition people would have a field day. A combined airline would have 53% of the slots at the world”s largest international air hub, never mind that Air France has 49% of CDG and Lufthansa 47% of Frankfurt.
It is likely that British Airways would have to dispose of some of the turf thereby offering an opportunity for third party carriers to get on to the Heathrow ” New York gravy train, and other London ” US routes. Is that what BA wants? In any event it would need to raise the money for the bid, clearly knowing that some of this funding would be redeemed with a break-up (and of course the slot sale).
Virgin Atlantic is also seen as another possible buyer of bmi and on face value it makes sense. The airline is the most commercially astute of British carriers and has built up a fine reputation for its services. But would it really want bmi and all its European baggage? Just like BA, any slot disposal would attract competition, which is the last thing Virgin needs. Does Sir Richard just sit back and see how things play out?
One must never rule out the possibility of a wealthy foreign investor coming in for bmi whether it is a venture capitalist private equity group, Russian oligarch, or a quasi government-owned airline from the Middle East. It would be a field day for the lawyers, the complexity of ownership rules and bilaterals a real minefield. The present minority partners do not seem interested although they will be sure to have their say.
British Airways itself could be put on the market. That is an interesting one.
Will bmi be sold? Over to you Sir Michael.