It’s almost official. British Airways will close on its purchase of bmi in short order. Will it be good or bad for travel in the UK?
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After a few months of hemming and hawing, Lufthansa has finally started to make its mark on bmi. The airline announced a big restructuring that will involve cutting routes, moving airplanes around, and just generally aligning itself better with the growing Lufthansa empire.
When Lufthansa took control of bmi thanks to a previous agreement that made them pay a ton of money for the airline, the first plan was to sell it off. After it became apparent that they weren’t going to get the price they wanted (or even close to what they paid), they announced on November 2 that they would just try to get bmi into better shape on their own. It took them less than a month to bring out their plans.
This map was recently released showing what’s in store:
Oh wait, nevermind. That map’s about 70 years old, and as I recall, it didn’t work out so well for the Germans then. Of course, this version of Lufthansa didn’t exist back then, and their plans are actually far less, um, aggressive. As a reminder, there is bmi, which operates mainline aircraft out of London/Heathrow, and bmi regional which flies regional jets from other UK airports.
- bmi will go down from 39 to 30 airplanes. The fleet will now be made up of mostly A320 family aircraft with three Embraer 145s, a single A330, and a single 757. It wouldn’t surprise me to see those go away when the leases expire.
- bmi regional will see its number of regional jets rise from 15 to 17 thanks to bmi’s decision to send two back to bmi regional. bmi regional is looking to get rid of 3 of those airplanes, but nothing has happened yet.
- Flights from Heathrow to Brussels, Tel Aviv, Kiev, and Aleppo will end in January, but those cities will continue to be served by other Star alliance carriers via connections. The Brussels flights will instead operate under a codeshare with Brussels Airlines, another Lufthansa-owned airline.
- Flights from Heathrow to Amsterdam will go away in March.
- Seasonal runs from Heathrow to Venice and Palma won’t be coming back.
This is a pretty big cut in terms of aircraft flying, and that means that there will be plenty of unused Heathrow slots. Where will those go? Will they sell them off? Or will another Lufthansa-owned carrier pick up the slack? It will be very interesting to see what they do with those.
bmi’s strategy doesn’t look much different to me. They will continue to focus on Europe and the Middle East as they’ve been doing, but they’ll just have fewer airplanes doing it. There doesn’t appear to be any interest in London-US flying, so instead they’ll just look at how they can make bmi best fit into the Lufthansa puzzle.
It’s a new year, and that means Lufthansa will probably acquire another 15 airlines before the year is out. If I were a betting man, I would expect to hear SAS and Virgin Atlantic involved in those discussions, but I wouldn’t expect Alitalia. It sounds like Air France/KLM may have won that battle.
Of course, this all remains to be seen. What we do know is that Lufthansa already owns a bunch of airlines, and I’d guess you probably don’t know them all. (I didn’t.)
Here is my compilation of all the airlines that are currently at least partially owned by Lufthansa. I’ve included main country of operation and Lufthansa’s percentage ownership in the graphic. Let me know if I’ve missed anything.
[Edited image 1/5 @ 516p to reflect additional airline ownership stakes]
[Edited image again on 1/6 @ 627p to reflect even more ownership stakes]
Lufthansa has owned a 30% share in UK-based airline bmi for some time, and now bmi chief Sir Michael Bishop has exercised his option to sell his 50% (plus one share) stake to the airline for a whopping 400 million euros. That’s no chump change – you know he’s a happy man to be getting out with that kind of money at this time. So now, Lufthansa has to figure out what to do with the airline which has 12% of all slots at Heathrow. Here are some possible options:
- Keep it Going – Lufthansa could continue to operate bmi as is, but this is highly unlikely. The airline is wasting slots on many smaller short haul routes, and it still has no Transatlantic presence out of Heathrow. Something will change. Besides, they’ve already announced the long haul Manchester flights go away in the New Year, so things are changing no matter what.
- Bring in Lufthansa’s Brand – Lufthansa could try to pull an Air France-style setup where bmi would disappear and Lufthansa could become a major player under its own name, especially on Transatlantic flights from London. This isn’t likely to have positive results, as Air France has shown. And there’s no reason to kill whatever local brand-loyalty there is already. I think it’s unlikely.
- Sell Pieces – Lufthansa could decide to cut out the pieces it likes. Maybe it wants to keep all the London slots and sell everything else to another regional carrier in the UK. I’d see this might be plausible and then it could keep what it wants to develop out.
- Tie Up with Virgin – This one could easily happen along with the previous one. Take the London slots, merge with Virgin Atlantic, and create a very strong London brand that’s far greater than what Virgin has now. Oh, and yes, bring Virgin Atlantic into Star Alliance. Virgin is clearly interested. Virgin’s CEO even says:
Everyone has speculated that it would make sense for Virgin Atlantic and BMI to combine their long-haul and short-haul networks. There is now a major opportunity to do that. I am sure that Lufthansa realises this could be a really good example of the right industry consolidation.
So, we’ve got a very interesting situation developing over there. If Virgin joins with Lufthansa, this would be a great gain for the Star Alliance and it would clearly not make BA happy. I’d say that might be the best bet right now and it’s one that Star Alliance members should be happy about. Since London Transatlantic flying is really hurting right now in the financial crisis, the time might be right to make this happen for a relatively low price.
Edited 11/6 @ 526p to reflect the purchase price of 400 million euros and not the absurdly low 400 euros. Oops.
I haven’t done one of these in awhile . . .
- Southwest Bumps Up Beer Prices – Boooooooo to Southwest for increasing the price of beer onboard from $3 to $4. And a double boooooooo for actually trying to make it sound like it’s a good thing for the customer in their email blast.
. . . our ever-popular Drink Coupon Books will have a new look and simplified redemption. With the new coupons, your favorite beer, wine, or mixed drink is now only one coupon away! And the new look to the books will definitely give you something to talk about with your seatmate!
- Bmi Giving Up . . . – With Heathrow opening up soon, British Airways has apparently decided to start buying up slots to prevent competition. Rumor has it that they just purchased 51 slots a week from bmi. Now that bmi can serve the US from Heathrow, I have no idea why they’d consider selling these slots unless they needed the cash. After all, BA paid GBP 30 million for them, if you believe the article. I’m also not sure how they’ll use 51 slots when a slot is good for either a takeoff OR landing. There’s going to be one plane landing that can’t take off again!
- . . . Uh, or Not? – I’m not sure why Bmi would have sold those slots if this next story is true. It is being reported that United and Bmi have applied for joint flight operations over the Pond.Â This sounds similar to what Northwest and KLM have done. United would sell tickets in the US and Bmi would sell in the UK. I have no idea why you’d want to sell your slots if this were the case. Something’s not right here.
- How is Varig Still Flying? – These guys truly have nine lives. After years of near-death experiences, they now seem to have found solid footing. Gol, the successful Brazilian low cost carrier, has decided to buy the airline to eliminate a competitor. They’re going to run the two airlines separately. It seems to me that besides eliminating a competitor, they wanted to get access to Sao Paulo’s Congonhas airport (S.A.T. time: Congonhas is to Sao Paulo as National is to Washington DC) and the airline’s international route authorities.