BA parent IAG faces delay to BMI deal

BA parent IAG faces delay to BMI deal

British Airways parent IAG's hopes of a quick deal to buy BMI may be frustrated, with the European Commission set to rule the group's offer of slot concessions at Heathrow is insufficient to win immediate clearance.

International Airlines Group has agreed a £172-million takeover of loss-making BMI from Lufthansa.

The EC revealed IAG had offered concessions on Monday. It did not give details, but IAG is believed to have offered to relinquish some take-off and landing slots at Heathrow where the deal would give it more than 53% of the total. BA currently has almost 45% of slots at Heathrow and BMI is the second-biggest carrier at the airport.

The Financial Times reported IAG’s lawyers have been told the proposals are unlikely to address Brussels’ full range of competition concerns.

An IAG spokeswoman said: "We are talking to the EU and remain confident we will receive regulatory approval for the deal."

The Commission has pushed back the deadline for an initial ruling on the takeover to March 30. BA and Lufthansa had hoped for a decision at the end of this week.The EC could simply give a go-ahead or refer the deal for a more-detailed study.

The EC typically requires airlines to cede slots and offer rivals access to their frequent flyer programmes in return for clearing mergers and acquisitions in the sector.

The takeover was agreed before Christmas, but Lufthansa is understood to want a quick deal in order to remove the heavily loss-making BMI off its balance sheet.

IAG has insisted on financial penalties if Lufthansa does not succeed in selling budget operation bmibaby and regional carrier BMI regional ahead of signing off the deal with IAG. BMI has reported it has two unnamed, potential buyers for bmibaby.

BA rival Virgin Atlantic has led opposition to the deal and has written to the EC demanding it be blocked, arguing no remedies would be sufficient to guarantee a level playing field.

Virgin has tabled a smaller, competing bid for BMI which it believes could become attractive to Lufthansa if the BA deal is put on hold.

The UK Office of Fair Trading has foregone the opportunity to seek its own review of the deal.

BMI's auditors PricewaterhouseCoopers reported "significant doubt over the ability of BMI to continue as a  going concern" in January. IAG has said its bid is the best hope of maintaining BMI services.

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