Virgin hopes to create 'true network carrier' at LHR with bmi mainline acquisition
Tuesday December 23, 2008
Virgin Atlantic Airways is not interested in acquiring bmi regional or bmibaby and is negotiating with Lufthansa solely about the acquisition of bmi's mainline operation at London Heathrow, Virgin CFO Julia Southern confirmed to ATWOnline.
"We are in the very early stage of talks, and whether they go anywhere or not we don't know," Southern said, reiterating VS's statement that "discussions may or may not lead to an agreement". She added that "if bmi happened, I suspect that joining Star Alliance would be something that would follow on from that, but talks are at such an early stage it is premature to be thinking about that now."
She acknowledged that combining bmi's short-haul and Virgin's long-haul operations would change VS's present point-to-point model. "It will be a challenge but I still think it would be the right thing to do if that ever becomes a serious possibility," she said, noting that a potential deal was not about the slots. Bmi holds some 12% of LHR's slots and VS 3.5%. "If you acquired all those slots and used them for long-haul routes. . .that does not work as a business model. It's about bringing the feeder traffic together, combining the long-haul network with the short-haul network. This would be about both businesses benefiting from synergies, both in terms of revenue and cost."
In addition, Southern argued, the creation of a "true network carrier" at LHR would provide passengers with "badly needed competition" for British Airways. Virgin is a fierce and outspoken opponent of BA's and American Airlines' application for antitrust immunity. Virgin and Air France are the only carriers filing objections to the US Dept. of Transportation regarding the immunity sought by oneworld partners BA, AA, Iberia, Finnair and Royal Jordanian. DOT requested further information from BA, AA and IB last Friday, according to press reports.
Meanwhile, LH Chairman and CEO Wolfgang Mayrhuber told Frankfurt's Borsen Zeitung that the German company will evaluate the future of bmi only after the UK carrier returns to profit. Bmi has said it expects a loss this year.
Southern also conceded that the group's intent to sell or reduce its 49% shareholding in Virgin Nigeria has been put on hold owing to the current credit crunch. "The business is increasingly independent and we would be happy to sell or reduce our shareholding as part of a private placement capital-raising process. Clearly, that has been temporally put on hold for the moment because the markets just won't support it. So for now we maintain our shareholding, the brand remains on the business and even beyond the sale the brand could remain on the business," she said.
by Cathy Buyck
ATWOnline
