IAG chief executive Willie Walsh celebrated his airline’s purchase of bmi on Friday by deriding his “humiliated” rival Richard Branson and challenging Virgin Atlantic to make good on its promises to provide short-haul services to Scotland.
Speaking after the deal was cleared by European competition authorities, Walsh said the news was great for Heathrow and Britain’s economy. The £172.5m acquisition by the British Airways parent company was approved after the airline agreed to relinquish 14 landing slot pairs at Heathrow.
The merger still gives the airline an extra 42 slots and consolidates its leading position at the UK’s biggest airport. Virgin, which had also hoped to buy bmi from its parent Lufthansa, had claimed the IAG takeover would inevitably mean less choice and diminished domestic services.
The European competition commissioner, Joaquín Almunia, said: “The commitments package includes an appropriate number of very sought-after slots at London Heathrow as well as far-reaching feeder arrangements as regards connecting passengers. We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers.”
A delighted Walsh said IAG now had “the opportunity to really fulfil the potential we’ve always believed existed at Heathrow”. He said the extra slots would allow the airline to serve new destinations, make Heathrow a better hub and strengthen the UK economy.
He said the deal would “secure the maximum number of jobs” at bmi, although he conceded many of the 2,000-plus staff would go. But he said: “Lufthansa were seriously considering shutting down the airline with the loss of all jobs. We’ll engage now with bmi and their unions as soon as possible but inevitably there will be job losses.”
Seven of the relinquished Heathrow slots must be sold to operators providing flights to Edinburgh and Aberdeen.
Walsh challenged Virgin, which had warned that domestic services would be lost in a BA-bmi merger, to step in. He said Branson’s airline, when still hoping to win bmi for itself, had pledged to Scottish politicians it would operate such flights. “I would expect Virgin to honour the commitments they have made. They have said they would start flights to Scotland. They now have the ideal opportunity.”
IAG must also provide competitors with access to seats on its UK and European services, allowing airlines such as Virgin to book journeys for passengers who wish to transfer on to its long-haul flights. Walsh said: “It must be humiliating for Virgin and Branson to have to rely on the BA network to feed their traffic.
“It clearly demonstrates that the Virgin business model is not sustainable … they are reliant on their biggest rival’s network.”
Walsh said IAG would operate bmi’s published schedule in the short-term but soon expand IAG’s long-haul network, announcing new destinations in Asia.
On Thursday Branson had made a last-ditch appeal to the EU commission to scrutinise the deal further. However, Walsh said it had been a “very detailed” examination of competition concerns.
Ryanair also condemned the deal for what it called the “discriminatory” application of competition rules, complaining that it contrasted with the treatment of Ryanair’s 2006 offer for Aer Lingus. Ryanair boss Michael O’Leary said: “While we have no objection to BA’s acquisition of bmi, it will undoubtedly lead to higher fares and higher fuel surcharges … It also exposes again the commission’s discrimination against Ryanair in its 2006 prohibition of our offer for Aer Lingus, an airline which accounts for less than 1% of EU air travel.”