Brighter skies for BMI after restructuring

14.4.2010 (FT)

By Pilita Clark, Aerospace Correspondent

A sweeping restructuring programme has put BMI British Midland on track to halve
its losses this year, its new chief executive said on Tuesday. He added that there
were currently no plans to break up the struggling airline.

Speculation that the loss-making UK airline, which is owned by Germany’s Lufthansa, might be dismembered or sold off rose last year after its auditors cast doubt
on its ability to continue as a going concern.

However, Wolfgang Prock-Schauer, the Austrian appointed to run BMI late last
year, said it would remain in one piece. The group runs a long-distance international
operation plus a UK regional subsidiary and the low-cost carrier BMIbaby.

"We have no intention of breaking up BMI. It will be here to stay," Mr Prock-Schauer
told reporters in London, in his first interview since taking up his role at the
carrier in December.

Mr Prock-Schauer said BMI was already planning to boost flights to continental
Europe and potentially North America, although this was only an option at this

He added that he could not rule out a possible sale of BMI at some point in the
future, given the constantly changing state of the aviation industry.

"To say now the door is shut forever would be not right because there are so
many combinations going on," he said.

"Right now, the focus is on restructuring and then we’ll see what kind of opportunities
arise later. We want to create a valuable asset for the Lufthansa group and the
owner can always then make the assessment of what to do with this asset."

Willie Walsh, British Airways chief executive, has frequently expressed interest
in BMI, which holds around 10 per cent of the take-off and
landing slots at London’s Heathrow airport, the highest number of any airline after BA.

Mr Prock-Schauer confirmed that, as part of its recovery plans, BMI had sold
a number of slots to other airlines in the Lufthansa group, which recently acquired
Brussels Airlines and Austrian Airlines, having taken over Swiss in 2005.

Virgin Atlantic, the long-haul carrier founded by Sir Richard Branson, has also
said it was in talks with Lufthansa about the future of BMI.

But Mr Prock-Schauer said no talks were taking place at present as the group
focuses on a £100m ($154m) restructuring plan aimed at turning the carrier round
after it suffered a £156m loss in 2008 and an even worse deficit in 2009.

The plan involves 800 redundancies, cutting the aircraft fleet by 10 and eliminating unprofitable routes. While a pay freeze has been negotiated with BMI’s pilots, Mr Prock-Schauer said he was still in talks with unions representing other staff
members, which he described as "very constructive".

"Generally speaking, we see a lot of support from our employees," said Mr Prock-Schauer.
"They believe this company can make it and they are ready to make sacrifices."