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German airline could ‘walk away’ warns chief financial officer
The £100m cash row threatening Lufthansa’s forced takeover of bmi has intensified, reports said today (May 20).
Lufthansa’s cfo Stephan Gemkow told the Financial Times certain conditions of the takeover had not been met, and said a walk out on talks was possible.
The German carrier last week asked shareholders to recapitalise bmi after raising concerns that it could lose its licence.
Mr Gemkow said bmi’s weak financial condition, made worse by a record £100m loss last year, was holding up talks.
He said: “We do not intend to walk away from the deal. What we want to have is the company in its contractually agreed state and that means the company has the licences it needs to operate and the funds it needs to operate. This is contractually agreed.
“We have a situation in which, to our understanding, the conditions have not been met.
“If they are not met, one day we will walk away.”
Lufthansa is concerned over a UK Civil Aviation Authority (CAA) rule forcing an airline to have enough cash to operate for at least three months or risk losing its licence.
Mr Gemkow said it was clear that bmi faced a “difficult time” if nothing was done to satisfy the rule.
But Sir Michael Bishop, bmi’s chairman and controlling shareholder, snubbed Lufthansa’s demands. A spokesperson for Sir Michael said all conditions had been met.
It has been claimed Lufthansa’s cash demand is an attempt to sweeten the takeover of bmi which has been hit hard by the economic downturn.
Last October, Sir Michael exercised an option requiring Lufthansa to purchase a controlling share in bmi as part of a deal struck in 1999.
Lufthansa agreed to increase its stake in bmi to 80% for a reported £350m. The remaining 20% is held by Scandinavian airline SAS which has said it also wishes to sell.
bmi is the second largest airline at London Heathrow. Despite suffering financially the lucrative slots make bmi attractive to rivals of British Airways, the UK hub airport’s dominant carrier.