British Airways' Parent Company To Spend Over $270 Million To Acquire Money-Losing BMI

A blog about business and economics.
March 29 2012 9:48 AM

British Airways' Parent Company To Spend Over $270 Million To Acquire Money-Losing BMI

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Lufthansa owns a UK subsidiary called British Midlands International that loses money hand over first. Luckily for them, International Airlines Group (aka British Airways) is willing to take it off their hands for 172.5 million pounds or over $270 million. Why? Well because BMI possesses valuable landing slots at Heathrow Airport, which is BA's key hub. It wasn't possible for Lufthansa to operate those slots profitably in cooperation with BA, but by folding the slots into BA's existing operations IAG hopes to make money. Of course by the same token, Virgin Atlantic argued that regulators should block the deal since BA's goal seems to be to reduce competition. Lufthansa countered by threatened to just shut BMI down if the sale didn't get approval (also bad for competition) and now the European Union has agreed to let the sale go through if BMI agrees to give up 14 landing slots, not necessarily all of them at Heathrow.

All things considered, a sad day for Virgin and for Star Alliance frequent fliers but a happy one for Lufthansa.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.