BMI expected to break even
I noted this in one of todays papers. Has BMI turned the corner or is it living off of SAS and Lufthansa?.
BMI British Midland, controlled by Sir Michael Bishop, is expected to reveal this week that it managed to break even in 2004 after three years of heavy operating losses.
The airline, the second-largest operator at London’s Heathrow Airport, reported operating losses of £12.5m in 2003, £21.7m in 2002 and £29m in 2001 as it struggled to deal with the fall in traffic that followed the September 2001 terrorist attacks and the sea change in the structure of short-haul flying in Europe.
Yields, or average fare levels, have been hit by the rapid growth of the low-cost carriers led by easyJet and Ryanair. A clear sign that it has turned a corner came in preliminary figures released by BMI’s minority shareholder, SAS Scandinavian Airlines. Its 20% holding in BMI last year had a zero impact on its pre-tax income in 2004 after inflicting significant losses in 2003 and 2002.
BMI’s other shareholders include Bishop, who controls a majority stake of 50% plus one share, while German flag carrier Lufthansa holds 30% minus one share.
At Wednesday’s results for the year to December 31, 2004 - the first for new chief executive Nigel Turner - Bishop will also celebrate the upcoming launch of BMI’s first long-haul flight out of Heathrow, to Mumbai.
He is expected to target Saudi Arabia as a future long-haul destination from London while his ambition to operate transatlantic services remains frustrated by the lack of an "open skies" agreement between Europe and the US.
BMI’s improved performance last year owed a lot to Lufthansa and SAS shouldering most of the continuing losses from the three airlines’ European joint venture.
Under the terms of their deal, which runs to the end of 2007, the three airlines operate a revenue and profit-sharing joint venture comprising their European short-haul routes to and from Heathrow and Manchester.
Lufthansa is re-evaluating its 30% holding in BMI and it recently approached other carriers, including British Airways and Virgin Atlantic, to measure their interest in acquiring the stake.