IAG purchase of BMI will not be reviewed by OFT

Date added: 6 March, 2012

The OFT has decided not to review IAG’s deal to buy BMI from Lufthansa, so the decision on whether to approve the deal will remain with the European Commission., Virgin Atlantic earlier lodged a formal complaint about the merger with the Commission, which has until 16 March to decide, although the deadline may be extended. The Virgin complaint alleged the deal would create a monopoly for British Airways on some routes between Heathrow and Scotland and north-western England. Virgin says passengers could face higher fares and reduced services linking the North West, Scotland and Heathrow if BA takes over BMI. Virgin – which also bid for BMI – has also complained that the deal would give IAG a dominant position at Heathrow.
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The deal has raised concerns about a BA monopoly on some routes

5.3.2012 (BBC)

The UK’s Office of Fair Trading (OFT) has decided not to review BA-owner International Airline Group’s (IAG) deal to buy BMI from Lufthansa.

The move means the decision on whether to approve the deal will remain with the European Commission.

In February, Virgin Atlantic lodged a formal complaint about the merger with the Commission, which automatically reviews large deals.

It has until 16 March to decide, although the deadline may be extended.

The OFT had until Monday to decide whether to review the merger itself or leave it to EU regulators.

Monopoly

The Virgin complaint alleged the deal would create a monopoly for British Airways on some routes between Heathrow and Scotland and north-western England.

Passengers could face higher fares and reduced services linking the North West, Scotland and London Heathrow if British Airways succeeds in taking over rivals BMI, Virgin Atlantic has claimed.

These concerns led to calls for the the deal to be referred back to the OFT.

However, the regulator has said the European Commission is best placed to deal with the concerns.

“The proposed acquisition of BMI by IAG has generated a significant level of concern in the UK, especially in Scotland, the North West of England and Northern Ireland,” said Sheldon Mills, OFT director of mergers.

“We consider that the transaction should be subject to a careful and detailed review and we will continue to work closely with the European Commission to ensure that UK airline passengers will not lose out through the proposed deal,” he added.

Experience

Virgin – which also bid for BMI – has also complained that the deal would give IAG a dominant position at London Heathrow.

The OFT argued that examining this required reviewing the impact of the deal on routes across multiple countries, not just the UK.

And it said the European Commission had substantial experience dealing with mergers involving both airlines.

IAG has defended itself against the Virgin complaint.

In a statement last month, it said the deal was aimed at safeguarding services operated by the loss-making BMI.

“We’ve committed to keeping services from Belfast to Heathrow and increasing flights to Scotland. Virgin Atlantic has never flown to Scotland and, as far as we know, has no plans to do so,” it said.

http://www.bbc.co.uk/news/business-17258825

Anger as OFT declines to examine BMI takeover deal

by Damien Henderson Transport Correspondent

6.3.2012 (Herald Scotland)

THE controversial takeover of loss-making airline BMI by British Airways’ parent firm moved a step closer yesterday as the UK’s market regulator declined requests to scrutinise the deal.

Though acknowledging there was “significant concern” for passengers travelling between Scotland and Heathrow, the Office of Fair Trading (OFT) said the job of addressing these issues was best undertaken by the European Commission.

The OFT decision provoked disappointment from Virgin Atlantic, the leading rival bidder for BMI, and Labour, which had referred the takeover to the OFT. Both said it would lead to fares being hiked and services being cut, though the claims have been disputed by International Airlines Group, formed last year by the merger of BA and Spanish airline Iberia.

The £172.5 million purchase of BMI from Germany’s Lufthansa was announced in December and the European Commission has until March 31 to rule on whether to approve the deal.

Explaining the decision, Sheldon Mills, the OFT’s director of mergers, said: “The proposed acquisition of BMI by IAG has generated a significant level of concern in the UK especially in Scotland, the north west of England and Northern Ireland.

The ruling comes after Willie Walsh, IAG’s chief executive, warned last month that routes connecting Heathrow to Aberdeen and Edinburgh would be lost if the takeover was blocked as BMI would collapse, leaving its landing slots to be hived off to long haul airlines.

An IAG spokesman said: “We will continue to work closely with the European Commission authorities and are confident they will approve the deal.”

However, Virgin Atlantic accused the OFT of passing the buck. “We’re very disappointed that the OFT has failed to take responsibility for competitiveness in the UK aviation market,” a spokeswoman for the airline said, adding that it would “fundamentally change the landscape of UK aviation”.

Shadow Scottish Secretary Margaret Curran, who referred the deal to the OFT, said she would ask the European Commission to consider the impact of the takeover on Scottish passengers and businesses and to consider the risk of reducing competition. She said: “The OFT has now decided that these issues are best addressed at a European level and the Commission must now conduct a proper scrutiny of this proposed sale to ensure that UK airline passengers will not lose out.”

http://www.heraldscotland.com/news/transport/anger-as-oft-declines-to-examine-bmi-takeover-deal.16944881

Earlier

Bmi to be ‘integrated quickly’ into British Airways

1.3.2012 IAG plans to integrate Bmi into British Airways “as quickly as possible” if it gets clearance for the takeover from regulators. The £172.5 million agreement for IAG to buy Bmi from Lufthansa is currently being looked at by European competition regulators and a decision could be made as early as March 16th. The process could be delayed if the Office of Fair Trading decides to ask for permission to investigate the deal. Virgin wants the deal blocked. Some in Scotland think the deal may reduce its services to Heathrow. Lufthansa has already reached a provisional agreement to sell Bmibaby to an unnamed UK-based company while BMI Regional is due to be sold to a group of UK investors known as Granite Aviation. https://www.airportwatch.org.uk/?p=6841

Virgin and BA owner IAG fight to buy BMI from Lufthansa

14.12.2011 (BBC) Lufthansa, which owns BMI, has said it has not yet decided on a buyer for the carrier. In November Lufthansa signed an agreement with International Airlines Group (IAG), to work towards a final deal. However, the agreement was not exclusive and Lufthansa has now said it also has a deal with Virgin. So both still have a chance of buying BMI, which has 8.5% of the landing slots at Heathrow – seen as the main attraction to buyers. https://www.airportwatch.org.uk/?p=499

BA buys 6 pairs of slots at Heathrow from bmi

26.9.2011 (ABTN) British Airways has bought the lots from bmi, which now gives it 45% of the slots at the country’s major airport. This has increased specualtion that the International Airline Group (IAG) of which BA is a part, could buy more slots from the loss making bmi or even take over the whole airline. The 6 pairs of slots, estimated to cost between €100m and €150m, will be used to expand both BA’s short and long haul services, possibly including new destinations. https://www.airportwatch.org.uk/?p=4584

BA ready to bid for BMI’s take off slots to expand at Heathrow

11.9.2011 (Telegraph) BA is likely to bid for Lufthansa-owned BMI, the 2nd biggest operator at Heathrow airport. Lufthansa wants to sell or break up BMI, which is loss-making. IAG wants BMI, not for the whole airline, but for its valuable take off and landing slots at overcrowded Heathrow. BMI has 11%pc of Heathrow’scapacity – valued at £770m 3 years ago – while BA controls 42% and Iberia 2%. Any addition would raise regulatory and monopoly issues that need to be overcome. https://www.airportwatch.org.uk/?p=4571