International Airlines Group, comprising British Airways and Iberia, unveiled a deal to buy Lufthansa’s British Midland unit last Friday, alongside results showing a drop in IAG profits.
“IAG and Lufthansa have today reached an agreement in principle for the sale of British Midland Ltd (BMI),” said a joint statement that did not disclose a price.
The companies aim to sign a binding purchase agreement for loss-making BMI in the coming weeks, and complete the transaction in the first quarter of 2012.
“This is a great story for IAG and also great for the UK economy and for consumers,” IAG chief executive Willie Walsh said.
“We will expand our networks, particularly on long-haul, which is so critically important to the UK economy. The deal will allow us to connect further to the emerging world economies.”
Walsh added that it was “far too early” to discuss any impact on jobs as a result of the takeover.
Media reports said Virgin Atlantic had also been interested in buying British Midland (BMI) because of its attractive slots – take-off and landing rights – at London’s Heathrow airport.
Heathrow is Europe’s biggest airport in terms of passengers handled.
Together, BMI and British Airways would hold 51 per cent of slots at Heathrow, according to German business daily Handelsblatt.
Lufthansa acquired BMI in 2009, but the recent crises and conflicts in the key regions of North Africa and the Middle East prevented the German carrier from steering the unit back into profit.
IAG also announced last Friday that the group’s net profit sank 26 per cent to €267 million in the three months to September.
“High fuel costs continue to have a significant impact on our business. This quarter, fuel costs are up 23.7 per cent, compared to last year, while non-fuel costs are flat,” the company said.
Jet fuel, or kerosene, is refined from crude oil.
“The main challenge for 2012 will be to offset increased fuel costs,” Walsh added.
IAG was created in January, while the 2010 results were calculated on a pro forma basis, as if BA and Iberia had already been trading as a combined group.