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.

Man, this has been a busy week. I know I spent half of it lounging around Peru, but long vacations always make it harder to catch up on work when you return. Combine that with the fact that I’ve got a new job at PriceGrabber (Director of Community), and I’m just struggling to make it to the weekend. So, let’s get to what I missed in the international world and I promise I’ll have some more extensive stuff ready for next week.

Nationwide Goes Down – It’s not just US airlines that are dropping like flies. Looks like Nationwide Airlines out of South Africa is the latest casualty. To be fair, these guys didn’t really have their stuff together in the first place. I mean, they were grounded last year when a friggin’ engine fell off one of their planes. When something like that happens, it’s not easy to recover. They didn’t.

Virgin Atlantic Thinks You’re Pretty Enough – At least half the time someone brings up Virgin Atlantic, it’s quickly followed by a mention of the inflight massage and manicure. Of course, that was only available in Upper Class, but now it’s not available anywhere. Virgin has decided to kick the beauticians off the plane. So, you’ll have to get a massage or manicure beforehand. I know, rough life.

Neeleman Has Only One Name Idea – You’ve started a successful low cost carrier named JetBlue, and now you’ve moved on to found a Brazilian airline. What should you call it? Well, the plan was to have a naming competition, but that ended with the name Samba, and apparently he didn’t like that. So he went with choice #2 – Azul. Yep, that means Blue in Portuguese. Geez, so creative.

Alitalia Grabs Illegal Loan – Ah, my favorite subject. Italians are now 300m euros poorer since the government decided to loan Alitalia the money to keep the airline afloat. Of course, it’s already been challenged by the EU, and Italy has to somehow justify how this is legal. Good times.

It seems like just yesterday Richard Branson was touting how his (Virgin Atlantic’s) planes were better because they all had four engines, unlike those British Airways 777s. He even painted it on his planes. You might recognize the picture on the left as a former integral part of the livery on the 4 engine A340-600.

Well, apparently he’s changed his mind.

Earlier this week, Branson entered into the environmentally (and pocketbook) friendly agreement with Boeing to order 15 787-9s with options for 8 more and purchase rights for 20 more. The 787 is going to theoretically be a rock star when it comes to fuel consumption, so Branson just couldn’t keep justifying the A340 “4 engine” thing any longer. I say theoretically because we haven’t actually seen the thing fly yet.

But being the shrewd businessman that he is, he’s not just calling this an aircraft order. Nay. It’s an environmental partnership.

Huh?

Well, I suppose you could say that just ordering the highly fuel-efficient aircraft is environmentally friendly, but he’s doing another couple of things as well. First, next year there will be a demonstration of biofuels in one of the Virgin 747s. I’m not sure how this is a partnership with Boeing because it’s the GE engines that really need to run on the fuels, but whatever.

Second, he’s still pushing ways to cut fuel burn on the ground. Boeing will now join Branson in his quest to get aircraft towed to “starting gates” near the end of the runway. That way they don’t need to turn on the engines until they’re ready to go. Again, I’m not sure what this has to do with Boeing since last time I checked, Boeing didn’t run any airports. Maybe they’re going to help modify the aircraft to make this easier?

No matter what, Branson is a very shrewd businessman. He knows that calling something environmentally friendly is going to get big press coverage these days. In reality, this is one of the glorious times where doing what’s right for the environment is also doing what’s right for the bank account. When that happens, it’s good news all around.