CPH
The deal was designed to stop British Midland (as it was then) expanding into both SAS & Luftansa home markets, at that time BM was seen as having a lower cost base and able to both undercut both carriers and provide a far better service in diamond class.
They got into bed with BM to protect their home markets, however since Easyjet and to a lesser extent Ryanair it doesn't make much sense.
The really interesting thing in bmi 2007 accounts is the rolling in of £770m in slot valuation in respect of the slots that it holds at LHR, this move could depending on the terms of the various put/call change the figures for both SAS & LF
bmi have of course been aware of end of the ECA for years and project blue sky was implemented to address the end of this.
The ABN came up with some very fancy ideas as to what would happen in 2008/2009 including LH buying the SIA 49% stake in Virgin and merging it with bmi, the only problem is that whilst 49% will get you seats at the board table the other 51% still call the shots and in bmi that means SMB who is sole owner of the other 51%.
Expect the unexpected where bmi are concerned