Maybe not a merger, just a closer reign over the management of Regional? WP-S was interviewed a week or so ago for Business Traveller (
here) and seems pretty clear that Mainline, Baby and Regional all have future roles to play as part of BMI and the LH group...
"In this all three of the airlines have a specific role to play. Bmi International is out of LHR. Regional serves the regions and more, and will serve over water routes to continental Lufthansa hubs, and Bmibaby we want to keep so we have a foothold in the UK low cost carrier market as the UK is predominantly low cost, as part of our complete offering, just as Lufthansa has Germanwings."
Intriguing that Regional "will serve" international routes. I would have hoped that LH hubs would mean decent multiple daily departures to FRA rather than the patchwork services to CPH and BRU....