Few financial details were immediately available, although more may be revealed Friday, when IAG, the parent company of British Airways plc and Iberia Líneas Aéreas de España SA, announces its nine-month results. Lufthansa's reported keenness to dispose of such a big drain on its resources has led some analysts to speculate it could sell the bmi slots at a fraction of their economic value to BA.
However, the source confirmed media reports that a memorandum of understanding between the two biggest European airline groups had been signed and said the press stories were "essentially correct."
The confirmation comes just days after bmi announced it was "in advanced discussions to sell bmi Regional to a U.K.-based investor group previously associated with the regional business," a clear signal that Lufthansa was preparing to break up the company and sell off its three businesses to separate bidders. With the regional unit sold to a possible management or related team and the international airline handed over to British Airways, bmi's budget airline bmibaby Ltd. could be a target for other low-cost carriers.
Bmi International, based at Castle Donington, England, is the No. 2 airline at London's Heathrow Airport, Europe's busiest, with almost 9% of the takeoff and landing slots. A sale to IAG would consolidate BA's position as the dominant airline there.
The other big U.K. airline, Richard Branson's Virgin Atlantic Airways Ltd., has reportedly been unable to find a financial partner to enable it to place a rival bid of its own. However, it may be able to acquire some of the bmi slots if its archrival, BA, is forced to relinquish some for competition reasons.
But in a statement Thursday, Virgin Atlantic said it was still talking with Lufthansa and warned against allowing BA to ramp up its hold over Heathrow.
"We are fully engaged in discussions with Lufthansa over the sale of BMI and are following the transaction process as agreed between us," it said. "British Airways' hold over Heathrow is already too dominant and we are very concerned -- as the competition authorities should also be -- that BA's purchase of BMI would be disastrous for consumer choice and competition. Heathrow is the world's busiest international airport, and government has made clear that it is closed for growth, removing any chance of competitors challenging BA's monopoly in this market."
Lufthansa declined to comment, while bmi confined itself to repeating what it said when six of its slots were sold to BA in September. At the time it said because the slots were either leased out or outside its core schedule the sale would not affect its normal flight times. The relevance of the statement to a possible sale of slots that do serve the airline's core schedule appears tenuous.
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Proceeds from such a transaction could be used to bolster parts of the business where the company has scale and can have a more meaningful impact on financials. More video