Right on the heels of the Delta-Northwest merger comes word that Lufthansa has acquired an 80 percent stake in British Midland Airways (BMI) for €400 million ($318 million). The German carrier purchased a 30 percent stake in BMI in 1999 and acquired the other 50 percent today from BMI Chairman Sir Michael Bishop.
It is expected to make a bid for the other 20 percent, which is currently owned by Scandinavian Airlines (SAS). SAS is eager to sell its stake. The purchase gives Lufthansa more takeoff and landing slots at London Heathrow than any other airline except British Airways.
On hearing the news, Virgin Atlantic owner Sir Richard Branson proposed combining its operation with BMI. It isn’t clear, though, whether he wants to buy BMI from Lufthansa or integrate operations across all three airlines. Such a partnership will create Europe’s dominant airline. Lufthansa expressed no interest in selling BMI but hasn’t said anything about a partnership.
Is Lufthansa spreading itself too thin? Prior to acquiring BMI, it acquired a 45 percent stake in Brussels Airlines and is exploring a partnership with Alitalia as well as making a bid for Austrian Airlines. It has also reported a 75 percent drop in net profit for the third quarter and cut its operating profit target to €1.1 billion from €1.38 billion.
Only time will tell.
