BMI Sells Six Slots at London Heathrow to British Airways
2011-09-23 08:16:03.190 GMT
By Chris Reiter and Steve Rothwell
Sept. 23 (Bloomberg) -- BMI will sell six daily slots for
takeoff and landing at London’s Heathrow airport to British
Airways as Deutsche Lufthansa AG seeks to restructure the unit.
Lufthansa Chief Executive Officer Christoph Franz said this
week he was considering selling unneeded BMI slots at Heathrow
as the airline explores strategic options for the unprofitable
U.K. division, including a sale. Lufthansa and BA declined to
comment today on the transaction price.
BMI controlled 8.2 percent of takeoff and landing positions
at capacity-constrained Heathrow before the sale, making it the
biggest operator there after BA. The BA purchase increases the
likelihood BMI will be broken up, rather than sold as one unit,
said Stephen Furlong, an analyst at Davy Stockbrokers in Dublin.
“It would seem unlikely that it would be bought in its
entirety as a single company,” Furlong said today in a
telephone interview. “I wouldn’t put any significant value on
BMI. I don’t think it’s worth much without the slots.”
Takeoff and landing positions at Europe’s top hub are so
valuable that three years ago Continental Airlines paid $209
million for four pairs. BMI’s portfolio there is worth as much
as 460 million euros ($622 million), Citigroup Inc. analyst
Andrew Light said in a note prior to today’s announcement.
Shares Advance
Lufthansa, Europe’s second biggest airline, rose as much as
18 cents, or 1.9 percent, to 9.44 euros and was up 1.4 percent
to 9.40 euros as of 10:13 a.m. in Frankfurt trading. The shares
have dropped 43 percent this year, valuing the Cologne, Germany-
based carrier at 4.3 billion euros. BA parent International
Consolidated Airlines Group SA was up 2.5 percent in London.
Lufthansa has been considering a BMI sale after the
division racked up 223 million euros in operating losses
following a June 2009 takeover. The deal was forced on Lufthansa
when BMI founder Michael Bishop exercised an option to dispose
of his stake. Since then, BMI has cut 800 jobs and 10 planes in
a push to revive profit or make the business easier to sell.
“I’m not convinced that anybody would want to buy BMI as a
whole and then have the problem of restructuring it,” said
Chris Logan, an analyst at Echelon Research & Advisory in
London. “BMI doesn’t have a strong brand and the business is
loss making, so I’d imagine there will be more emphasis on
selling the slots.”
Lufthansa spent about 350 million pounds buying BMI,
including an initial stake bought in 1999, the purchase forced
by Bishop as airline stocks fell during the global slump and the
acquisition of a minority holding owned by SAS AB.
Increased Portfolio
BA will start using the slots purchased from BMI at the end
of next month to expand its long- and short-haul network, the
airline said in a statement today.
“We’re always looking to increase our slot portfolio at
Heathrow,” Laura Goodes, an IAG spokeswoman, said by phone
today. The purchase increases BA’s control of Heathrow slots by
1 percentage point to 45 percent, she said.
Lufthansa this month installed Vagn Ove Sorensen as BMI’s
chairman, and Stefan Lauer, who manages the group’s subsidiary
airlines, said in a Sept. 9 statement that the Dane’s
“experience with corporate restructuring is of particular
importance and value to the company in this crucial period.”
BMI differs from other Lufthansa-group airlines in that
it’s the No. 2 carrier at its home hub, and with “a substantial
gap,” Lauer has said. Lufthansa or its units are the biggest
carriers at hubs in Frankfurt, Munich, Zurich and Vienna, which
makes a “huge strategic difference,” he said.
BMI Exit
“There’s only one way for Lufthansa to solve the BMI issue
and that’s an exit from the business,” Furlong said. “It
doesn’t make strategic sense for them.”
BMI has its headquarters at Castle Donington, near Derby in
central England, and is made up of three businesses -- British
Midland International, based at Heathrow, low-cost unit bmibaby,
which serves European tourist destinations from Birmingham,
Manchester, Cardiff and East Midlands airport, and BMI Regional,
which operates smaller planes and is based in Aberdeen Scotland.
The company has 57 aircraft, with two-thirds leased and
therefore easier to get rid of should it be broken up, according
to data from aviation consultant Ascend.
The main British Midland International operation has a
network of predominantly European and Middle Eastern routes,
which prompted an operating loss of 120 million euros in the
first half as Arab unrest had a “severe impact” on traffic.
“The slot sale won’t have an impact on BMI’s flight
schedule,” Lufthansa spokeswoman Stefanie Stotz said by phone.
2011-09-23 08:16:03.190 GMT
By Chris Reiter and Steve Rothwell
Sept. 23 (Bloomberg) -- BMI will sell six daily slots for
takeoff and landing at London’s Heathrow airport to British
Airways as Deutsche Lufthansa AG seeks to restructure the unit.
Lufthansa Chief Executive Officer Christoph Franz said this
week he was considering selling unneeded BMI slots at Heathrow
as the airline explores strategic options for the unprofitable
U.K. division, including a sale. Lufthansa and BA declined to
comment today on the transaction price.
BMI controlled 8.2 percent of takeoff and landing positions
at capacity-constrained Heathrow before the sale, making it the
biggest operator there after BA. The BA purchase increases the
likelihood BMI will be broken up, rather than sold as one unit,
said Stephen Furlong, an analyst at Davy Stockbrokers in Dublin.
“It would seem unlikely that it would be bought in its
entirety as a single company,” Furlong said today in a
telephone interview. “I wouldn’t put any significant value on
BMI. I don’t think it’s worth much without the slots.”
Takeoff and landing positions at Europe’s top hub are so
valuable that three years ago Continental Airlines paid $209
million for four pairs. BMI’s portfolio there is worth as much
as 460 million euros ($622 million), Citigroup Inc. analyst
Andrew Light said in a note prior to today’s announcement.
Shares Advance
Lufthansa, Europe’s second biggest airline, rose as much as
18 cents, or 1.9 percent, to 9.44 euros and was up 1.4 percent
to 9.40 euros as of 10:13 a.m. in Frankfurt trading. The shares
have dropped 43 percent this year, valuing the Cologne, Germany-
based carrier at 4.3 billion euros. BA parent International
Consolidated Airlines Group SA was up 2.5 percent in London.
Lufthansa has been considering a BMI sale after the
division racked up 223 million euros in operating losses
following a June 2009 takeover. The deal was forced on Lufthansa
when BMI founder Michael Bishop exercised an option to dispose
of his stake. Since then, BMI has cut 800 jobs and 10 planes in
a push to revive profit or make the business easier to sell.
“I’m not convinced that anybody would want to buy BMI as a
whole and then have the problem of restructuring it,” said
Chris Logan, an analyst at Echelon Research & Advisory in
London. “BMI doesn’t have a strong brand and the business is
loss making, so I’d imagine there will be more emphasis on
selling the slots.”
Lufthansa spent about 350 million pounds buying BMI,
including an initial stake bought in 1999, the purchase forced
by Bishop as airline stocks fell during the global slump and the
acquisition of a minority holding owned by SAS AB.
Increased Portfolio
BA will start using the slots purchased from BMI at the end
of next month to expand its long- and short-haul network, the
airline said in a statement today.
“We’re always looking to increase our slot portfolio at
Heathrow,” Laura Goodes, an IAG spokeswoman, said by phone
today. The purchase increases BA’s control of Heathrow slots by
1 percentage point to 45 percent, she said.
Lufthansa this month installed Vagn Ove Sorensen as BMI’s
chairman, and Stefan Lauer, who manages the group’s subsidiary
airlines, said in a Sept. 9 statement that the Dane’s
“experience with corporate restructuring is of particular
importance and value to the company in this crucial period.”
BMI differs from other Lufthansa-group airlines in that
it’s the No. 2 carrier at its home hub, and with “a substantial
gap,” Lauer has said. Lufthansa or its units are the biggest
carriers at hubs in Frankfurt, Munich, Zurich and Vienna, which
makes a “huge strategic difference,” he said.
BMI Exit
“There’s only one way for Lufthansa to solve the BMI issue
and that’s an exit from the business,” Furlong said. “It
doesn’t make strategic sense for them.”
BMI has its headquarters at Castle Donington, near Derby in
central England, and is made up of three businesses -- British
Midland International, based at Heathrow, low-cost unit bmibaby,
which serves European tourist destinations from Birmingham,
Manchester, Cardiff and East Midlands airport, and BMI Regional,
which operates smaller planes and is based in Aberdeen Scotland.
The company has 57 aircraft, with two-thirds leased and
therefore easier to get rid of should it be broken up, according
to data from aviation consultant Ascend.
The main British Midland International operation has a
network of predominantly European and Middle Eastern routes,
which prompted an operating loss of 120 million euros in the
first half as Arab unrest had a “severe impact” on traffic.
“The slot sale won’t have an impact on BMI’s flight
schedule,” Lufthansa spokeswoman Stefanie Stotz said by phone.
