From today's Airline Economics newsletter:
It’s all about Heathrow slots on the European airline scene this week. As Willie Walsh closes in on BMI with his IAG Group, Virgin Atlantic tries to rope-in Etihad as a JV partner on its bid deal and has held talks with the Middle Eastern airline on the subject. Virgin wants more slots in order to grow, this is no news to anyone, but as reported here in Spring 2011, Etihad is after more slots at Heathrow to act as feeders for its current growing long-haul network. UK foreign ownership rules prevent Etihad from making a direct outright bid and Virgin just does not have the cash to trump IAG therefore this would be a dream ticket for both airlines. IAG will not go too far with its bid, however. The slots are only worth about £400m and as for the airline, well it is carrying a woeful pension deficit and a raft of other problems. That said, only a few years ago BMI was a real success story and could be once again under another banner. The staff at the airline are some of the best in the business and you have to wonder what, other than bad luck and the credit crises, led to this situation where current owner Lufthansa, the German flag-carrier, wrote off more than £140m of investment in BMI in the 18 months after it took control of the airline in June 2009. In the second half of 2009, Lufthansa poured £95m into the airline, which the directors also believed could not be recovered. Another £45m was thrown-in during 2010. The accounts stated: "The directors have assessed the recoverability of the investment in BMI and concluded, based on projected cash flows, that the investment should be fully impaired. This has resulted in an exceptional charge of £45m." The losses, revealed in documents placed with Companies House last week, leave no doubt as to why Lufthansa is desperate to get ride of the airline, and yet you have to wonder who at Lufthansa was leading the team that said buying BMI would be a good idea – company boards have been re-shuffled for a great deal less than this fiasco.