BA ready to bid for BMI to expand at Heathrow

[brakedwell]

Interesting article in today's Telegraph.

BA ready to bid for BMI to expand at Heathrow - Daily Telegraph (http://www.telegraph.co.uk/finance/newsbysector/transport/8756145/BA-ready-to-bid-for-BMI-to-expand-at-Heathrow.html)

[Fargoo]

IAG is not interested in bidding for all of BMI – it is already considering an offer for TAP, the Portuguese airline – but is ready to negotiate. An IAG official said: "He has made it very clear we are interested in BMI in terms of slots. The ball is now in Lufthansa's court."

Sounds more like they want to buy the slots off whoever buys the business , I always hoped BMI would survive under Luftys wing but it seems not

[ltn and beyond]

The article states BA only want the slots, so i fear it would not mean a ticket into BA for the crews. Unfortunately with BAA not being able to expand Heathrow, slots are going to be like gold and open to the highest bidder, even if that means some casualties on the way :uhoh:

[Tagron]

It's only a newspaper article, so the chances are it's not very accurate.

Of course slots are a major driver for BA, but do not lose sight of the reality that BA would like to see a competitor removed from the scene and under its control. It also needs space and capacity if it is to expand at LHR and T5 is not enough.

And you can't just buy slots and hoard them. You have to fly them or lose them. So unless the slots are sold piecemeal to a large number of purchasers , any airline buying the whole slot package without the rest of the assets would have to find rather quickly a large number of aircraft and crews. If BA is the purchaser they can continue to run BMI but absorb it into mainstream BA as quickly as possible, gaining from synergies BA (and probably noone else) could achieve, in this way alleviating the ongoing losses incurred from BMI.

Whether this is financially worthwhile is the calculation BA will have to make and will depend on the deal they strike with DLH, if indeed DLH are prepared to go this route, and the proportion of the slots they are allowed to keep by DLH and the regulators.

.

[Spitfire boy]

Will BA be tempted. Is there a one time opportunity for BA, LHR terminal and runway capacity allowing to close LGW ops and move the LGW long-haul flights to LHR?

[Redcap49]

Good point Spitfire.....
If a bid is successful I can see the LGW longhaul ops going over to LHR and the SH ops being offered as a sweetener to the likes of Flybe in order to appease the regulatory/competition issues.
It would also relieve BA of the forthcoming problems of having to go to the expense of replacing the ageing 737 fleet.LGW is now run as a separate business unit by BA,as were the regions before their sale to Flybe.
This must seem an attractive proposition to BA not just for the slots at LHR but also for the cost savings in closing LGW.

[stormin norman]

New routes take years to become profitable so i would envisage BA expanding capacity it already has with new(probally leased) aircraft.

BA has hundreds of type rated crew banging on the door at the moment so could ramp up fairly quickly if need be.Why take on liabilites it dosn't need ?

[xwindflirt]

I think if ba were to be the purchaser of mainline, ie the Lhr slots, the only people that might be kept on in the whole would be the crews. As has been stated earlier the slots must be flown. BA is in a recruitment mode. BMI mainline will not be allowed to fold as this would result in the loss of the slots. BA would have a hard time arguing that the crew positions were redundant at the same time as having recruited a few hundred new pilots and a thousand odd cabin crew.

[Aero Mad]

Why would any potential buyer want to sell off all the Heathrow slots and then be left with a load of crews kicking around? Then what? Doesn't sound very appealing to me.

[racedo]

No doubt Competition commission would be crawling all over a BA bid..........oh wait its BA so therefore anything goes. if they get bought by Jonny Foreigner in which case there are loads of competition issues.

[LD12986]

No doubt Competition commission would be crawling all over a BA bid..........oh wait its BA so therefore anything goes. if they get bought by Jonny Foreigner in which case there are loads of competition issues.


More like the other way around.

A BA bid would face competition enquiries. Meanwhile LH has been able to gobble up carriers all over Europe.

[ImPlaneCrazy]

Does anyone know a rough figure of how many LHR slots BA actually owns? Due to the size of their operation out of there I bet it is a right monopoly. And I guess it opens up the question; why is Heathrow such a popular base for airlines? These days more and more airports are looking desirable with improved transport links and so on, the only real difference I can see compared to the likes of Gatwick / Luton / Stansted is that it is on the tube.

[LD12986]

Does anyone know a rough figure of how many LHR slots BA actually owns? Due to the size of their operation out of there I bet it is a right monopoly. And I guess it opens up the question; why is Heathrow such a popular base for airlines? These days more and more airports are looking desirable with improved transport links and so on, the only real difference I can see compared to the likes of Gatwick / Luton / Stansted is that it is on the tube.


BA has about about 43% of slots at LHR which is significantly less than what AF, LH and KLM have at their respective hubs.

BD's share of slots at LHR has now fallen to about 8% after LH group has extracted slots so even if BA acquired BD without divesting slots its share would still be barely above 50%.

BA acquiring BD would enable new routes to be launched with the slots (China in particular) which will make LHR more competitive against other hubs so I don't see what is detrimental to the consumer interest.

As for LHR a lot of US inbounds are located in the Reading/Thames Valley area making LHR very convenient. It's network for business travellers also perpetuates its popularity and any other London airport would struggle to ever replicate this.

[ImPlaneCrazy]

But then again, Heathrow is the biggest airport in the world so it may amount to the same amount of movements surely? Or is there a considerable difference?

[TartinTon]

Not sure why you think it's the busiest airport in the world as it falls way behind Atlanta and a couple of million pax short of Chicago

[Max Angle]

Where does that leave the working crews of BMA in terms of continued employment, seniority and pensions?

Up effluent creek I suspect. Worrying times, yet again, for all of us at bmi.

[TURIN]

the only people that might be kept on in the whole would be the crews.

Er, no.

BA (and many others) are very short of qualified engineers.

BMI's A320 LAEs would be very welcome at LHR.

Good luck to em I say, they're going to need it.

[xwindflirt]

I think you may find Bmi engineering is a separate and profitable entity now. Lufthansa is unlikely to want to off load it unless a significant offer is made. In other words the engineering dept is probably the safest of all

[Tail-take-off]

Indeed the bmi engineers all have Lufthansa Technik approvals & now do all of the Lufthansa group line maintenance at LHR.

I expect a deal to be finalized around the opening of the new T2 at LHR. I would expect bmi Engineering Ltd to be absorbed it Lufthansa Technik, the customer service staff along with Menzies to become the main handling agent for T2 & what is left of mainline to be sold to BA following a rather painful downsizing & asset (slot) stripping process by Lufthansa.

I wouldn't be surprised to see Regional retained in some form to link UK regional airports to FRA.

As for baby, I can't see any of the LHR carriers being interested so probably a wholesale disposal to one of the low cost carriers.

[wiggy]

Not sure why you think it's the busiest airport in the world

I suspect because the BBC and other UK media outlets used to frequently to refer it as being so, then somewhere in the piece/article they would quietly slip in the qualification that they were talking about it actually being the busiest passenger airport in the world in terms of international passengers (how many passengers passing through ORD or ATL have to have a passport...).

Not sure that's true either nowadays, think the likes of Frankfurt, Schipol aren't far away ( and UK passenger duty is possibly driving lots of connecting traffic away from the UK anyway, but that's a different story)

[Peter47]

Here's a scenario for you to consider. BA is unlikely to be allowed to acquire BMI on competition grounds. So BA says right, we are going to pull out of domestic routes, we need the slots for Europe & long haul. The regions are in uproar. BA replies that it is very happy to interline and codeshare with BMI on Aberdeen, Edinburgh, Manchester, etc. Most BMI staff are still employed, BA no longer have regional crew bases and outsource handling so no big issues for its staff. As they are pulling off domestic routes there is no competition they might as well acquire BMI so that it stays in line.

The uproar from the regions might offset competition issues.

Of course there are issues. BA will need the extra slots gradually over a long period time - but it can always "babysit" some by using small aircraft on secondary European. The biggest danger would be for BA to pull off domestic without acquiring BMI which at some stage gets into bed with Branson.

Perhaps as a sweetener VS & other operators be given a block of seats on BMI domestic flights which would encourage competition (how does that fit into UK & EU competition policy)?

Thoughts anyone?

[Just a spotter]

While, on the face of it, purchasing BMI, or even Aer Lingus for it's LHR slots might sound attractive to another airline, consider this;

What happens if the UK Government decides, "Soddit, there's a recession on and we need more people through our airports". How do they quickly expand capacity at Heathrow? Easy, create something from nothing .... open up the 23:00 - 06:00 period to full ops. No need for a new runway or other expensive infrastructure. OK, plenty of disgruntled locals, but what are they going to do ... riot?

How many new slot pairing would opening up to full 24x7 ops create? What would that do to the price/value of the existing ones?

JAS

[davidjohnson6]

Petet47 - sounds like a high risk political game to me and unlikely to go down well with Govt when plenty of lobbying over competition issues may be necessary

[Currock Base]

I don't see why IAG would want to buy BMI mainline. It needs slots at LHR for BA to expand. BA has gone through 10 years of cost cutting solving a pensions issue twice, introducing new rostering and conditions and in general simplifying it's business.

Why would it add a BMI as a loss maker and increase complexity that has been solved in BA? It would be far simpler to buy slots or let BMI contact on it's own freeing slots and making skilled crews available to recruit.

Lets face it other than BA, who else would want that volume of slots at LHR? Virgin hasn't got the money. I would expect a few foriegn airlines interested in a few slots but not the number that BMI has. The UK isn't large enough for 3 mainline carriers at LHR, plus all of the low cost short haul across UK. BMI are trying to compete with BA on niche medium haul and both BA and Easyjet on London - Europe. Unfortunately for some great people at BMI, the market has probably moved on.

[airhumberside]

If BA gets slots, it needs aircraft and crew to use them from day one. Buying bmi mainline provides all three from day one

[Currock Base]

It does need aircraft and crews, but that is only a problem if everything is done in one go. IAG (and BA) have lots of options available to them:

1) 777 deliveries - 3 coming soon.
2) 747 returning from the desert - I think there are 2 more still parked up.
3) 787 deliveries starting 2013.
4) 380 deliveries starting 2013.
5) Defer 767 withdrawls due when 787's arrive.
6) Defer 747 withdrawls due when 380's arrive.
7) Juggle routes and a/c with LGW.
8) Use more IB aircraft on London - Spain.

This could be really interesting. Remember you also only have to use slots 80% of time to retain them so with some juggling of schedules and a/c around shorthaul you can spread them out.

[Gonzo]

Just a Spotter.....

What happens if the UK Government decides, "Soddit, there's a recession on and we need more people through our airports". How do they quickly expand capacity at Heathrow? Easy, create something from nothing .... open up the 23:00 - 06:00 period to full ops. No need for a new runway or other expensive infrastructure. OK, plenty of disgruntled locals, but what are they going to do ... riot?

How many new slot pairing would opening up to full 24x7 ops create? What would that do to the price/value of the existing ones?

That would take quite a few years lead time, and I'm only thinking about the extra Air Traffic Control staff that would need to be employed. An extra 20 or so controllers, another 5 Lighting Panel Operators and another 5 Assistants. Training time for an ATCO is about 3 years from scratch, worst case a 50 % success rate (hopefully better than that), so 40 taken on, training capacity at LHR is about 10-15 trainees at a time, so you'd be looking at 4 years, maybe 6 in reality with wastage/retirements/resignations etc.

And that's only the ATC staff, there would be a whole load more issues for BAA Airside Ops etc. Granted, we in ATC perhaps have the longest lead time.

The night jet ban allows the airport to do all of its routine maintenance in that period. On most nights we close off more than half the taxiways for repairs and checks, as well as one of our runways. I'd hate to think about that with more traffic around!