Branson Seeks Halt to BA ‘Salami Slicing’ of Lufthansa’s BMI

Richard Branson, the billionaire owner of Virgin Atlantic Airways Ltd., called on regulators to vet the purchase of operating slots at London’s Heathrow airport by chief rival British Airways from Deutsche Lufthansa AG. (LHA)

Virgin will this week write to the U.K. Office of Fair Trading and the European Commission after BA, already the No. 1 airline at capacity-constrained Heathrow, said Sept. 23 it would buy six daily takeoff and landing slots from Lufthansa-unit BMI.

“Branson is concerned that BA could be attempting to salami slice BMI’s key assets, increasing their dominance whilst leaving just an uncompetitive and unattractive rump for sale,” Crawley, England-based Virgin said today in a statement.

Branson has himself been pursuing BMI for more than a decade, and Virgin said today it recently renewed that interest as Lufthansa Chief Executive Officer Christoph Franz looks at offloading the unit. Virgin added that it didn’t bid for the slots sold last week because they were advertized as available only for lease, though BA says it bought them outright.

‘Non-Core’

Lufthansa is still “looking at all possibilities” for BMI, spokesman Aage Duenhaupt said by telephone, adding that the unit’s value isn’t affected by the disposal to British Airways.

“Whatever we have now sold does not impact network quality or the core value of BMI, because the slots are not part of the core activities of the BMI portfolio,” Duenhaupt said, declining to specify whether deals have been done over other slots.

International Consolidated Airlines Group SA, formed in January from a merger of British Airways and Spain’s Iberia, rose as much as 4.6 percent and was trading 3.4 percent higher at 146.90 pence as of 1:27 p.m. in London.

Lufthansa was priced up 2.8 percent at 9.62 euros. The Cologne, Germany-based carrier acquired BMI under duress in 2009 when then-owner Michael Bishop exercised a put option as the global slump hurt airline values.

At Virgin, which is closely held, Branson considered buying an initial BMI stake later acquired by Lufthansa in 1999, and CEO Steve Ridgway said in 2005 a tie-up was “the great undone deal in aviation,” given the “logic” of combining his company’s long-haul routes with BMI’s short- and mid-distance network.

BMI controlled 8.2 percent of operating positions at Heathrow before the sale to BMI, making it the second-biggest operator. The slot portfolio is worth as much as 460 million euros ($619 million), Citigroup Inc. analyst Andrew Light says.

Laura Goodes, a spokeswoman for IAG, said the London-based company wasn’t commenting on Branson’s remarks.

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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