Didn't Swissair do this just before they went on their arse? bmi...you are the weakest link...goodbye!
As has been pointed out earlier this is exactly what Air NZ did on their domestice (where they had less competition than BMI) and it saved them rather than destrpying them.
Swissair had incredibly high running costs and a more complex route structure that led to their downfall.
On the subject of STAR - US Airways - they are part of it, does that mean America West becomes part, and also US code shared with United (and presumably linked in with BMI long haul at IAD) - if that is the case with America West AND Virgin it would be vast.