BMED ‘in talks with bmi’
24 Jan 2007
The Daily Telegraph reports talks between BMED and a group of UK investors about a potential £30m rescue bid for the airline have broken down.
BMED announced earlier this month that the investors, who include a subsidiary of M1 Group, which is controlled by the Lebanese Mikati family, would provide £30m funding in return for majority control of the airline. They would also, as a ‘demonstration of good faith’, advance £3m of the £30m to BMED by way of a term loan to help meet the airline’s immediate liquidity requirements.
However, according to the Telegraph, the proposed deal has broken down and BMED is now in ‘last-ditch rescue talks with another airline’, believed to be bmi. BMED is reported to have written to its shareholders, who include its chairman, Tory peer Lord Hesketh with a 19% stake, warning that if the latest talks fail there is a risk it will be unable to pay its debts.
The paper quotes BMED chief executive, David Richardson: ‘While we are still having conversations with the Mikatis, their exclusivity period has come to an end. They wanted to make some pretty significant changes to the deal which our shareholders thought was unjustified.’
Richardson declined to comment on any other potential buyers, but added: ‘I am still confident that we will be able to secure a deal with someone. If you are an airline with eight slots at Heathrow, it’s bizarre that you wouldn’t survive in some shape or form because those slots have value.’
BMED, formerly British Mediterranean Airways, was established in 1994 and became a British Airways franchise partner in 1997. It currently operates a fleet of eight aircraft in BA colours to 16 destinations from Heathrow including Beirut, Damascus, Teheran, Tashkent and Khartoum, and employs 750 staff.
In the year to end-Mar05 BMED made a pre-tax profit of £5.1m on revenues of £99.7m. However, record oil prices coupled with the Jul06 Israel-Hezbollah hostilities in Lebanon are expected to push it to a £21m loss in the current financial year, on top of FY05/06’s £10m loss.
In FY04/05 BMED paid BA about £14m in franchise fees and for services including engineering and airport lounges, the Telegraph said. It also provided BA with £28m-worth of connecting passengers, while BA fed through £35m-worth to BMED.
Richardson told the paper: ‘BA are happy with the franchise agreement as it is but we are struggling to make it work for us.’