Iberia-BA buys Lufthansa's BMI unit for 207 million euros

IAG, the holding company for the merger of British Airways and Iberia, on Thursday said it had sealed an agreement with Lufthansa to acquire its loss-making British Midlands (BMI) unit for 172.5 million pounds (207 million euros).

The deal will allow IAG to increase the number of its slots at London's Heathrow airport by up to 56. Capacity is constrained at Heathrow, with the UK government vetoing plans to build a third runway there.

The acquisition of BMI will increase IAG's share of the landing and take-off slots at London's biggest airport to 53 percent.

Lufthansa has an option to sell BMI's BMI Regional and BMI Baby units prior to the completion of the deal with IAG, which is not interested in the subsidiaries.

"Buying BMI's mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports," IAG's chief executive Willie Walsh, said in a statement. "Using the slot portfolio more efficiently provides the option to launch new long-haul routes to key trading nations while supporting our broad domestic and shorthaul network," he added.

Walsh said BMI would need to be restructured, which would involve shedding jobs. He said restructuring costs would be spread over three years, but added these would be lower than BMI's annual losses, which amounted to 153 million pounds last year (184 million euros).

IAG beat out Virgin Atlantic in the push for BMI. But the airline owned by British magnate Richard Branson said it would pursue the sale with the British anti-trust authorities.

"BA is already dominant at Heathrow and their removal of BMI just tightens their stranglehold at the world's busiest international airport," Branson said in a statement. "We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry and bad for Britain."

The deal is subject to regulatory approval by the European Commission and is expected to be completed in the first quarter of next year. IAG said it plans to pay for BMI from its own funds.