Uncertainty over future of bmibaby

International Airlines Group (IAG), which owns BA and Iberia, will take on bmibaby and BMI Regional as part of its purchase agreement with Lufthansa but does not intend to keep the two businesses.

Announcing the completion of its purchase of loss-making BMI, IAG said it will run bmibaby and BMI Regional in the short-term while it looks at ways to exit the businesses.

Bmibaby, started in 2002 and flies out of Belfast, Birmingham and East Midlands airports, while BMI Regional offers short-haul flights from Aberdeen, Edinburgh, Glasgow, Leeds Bradford, Manchester and East Midlands.

German carrier Lufthansa had been looking to offload the two operators prior to the completion of the deal, but as this has not happened IAG will get a “significant reduction” on its £172.5m purchase price.

For IAG, the BMI deal will strengthen its position on long-haul routes out of Heathrow airport in west London.

However, it has angered Sir Richard Branson of rival Virgin Atlantic, who vowed to fight “this monopoly every step of the way”.

The deal was approved by the European Commission last month, although IAG must give up 14 pairs of daily take-off and landing slots at Heathrow as a contribution to boost competition in the sector.

It must also commit to carry connecting passengers to feed the long-haul flights of competing airlines out of London Heathrow.

Last week, IAG warned that the takeover of BMI was likely to lead to up to 1,200 job losses.

Positions facing the axe are at BMI’s head office at Castle Donington in Derbyshire and at regional airports, although IAG said that, without the acquisition, all 2,700 jobs at BMI, which is losing £3m a week, could have been lost.