BA to buy Virgin or BMI???

We can buy Virgin or BMI, says BA

Andrew Clark, transport correspondent
Monday May 26, 2003
The Guardian

Senior executives at British Airways will weigh up the prospects of a bid for Virgin Atlantic or BMI British Midland this week, raising the temperature in a red-hot outbreak of takeover fever across the aviation industry.
BA sources made it clear yesterday that the national flag carrier would not stand on the sidelines while Virgin attempts a tie-up with BMI.
BA’s chief executive Rod Eddington, finance director John Rishton and director of investments Roger Maynard will consider whether the airline’s £1.7bn cash pile could be used to fund a takeover.
A BA spokesman said: “We’re not ruling anything in and we’re not ruling anything out. We’re aware of the need to consolidate in the whole of the European aviation industry and we’re also aware of what’s been going on in the UK. We’ll be looking at where we stand and how we fit in.”
The intervention sent BA’s traditionally strained relations with Virgin to a new low. Sir Richard Branson’s airline claimed it had worked up its own plan, codenamed Project Balloon and backed by US financiers Texas Pacific, for a £1.5bn bid for BA – but had abandoned it at the last minute in favour of discussions with BMI.
Virgin’s corporate affairs director Will Whitehorn insisted that Virgin would be on the buying side of any deal. He dismissed the likelihood of Sir Richard selling his airline to BA, saying: “The prospect of that happening is the same as it is of those pigs flying over Battersea power station on Pink Floyd’s album cover.”
Any attempt by BA to buy Virgin Atlantic would have to be agreed by Sir Richard, who holds 51% of the shares with the rest owned by Singapore Airlines. He could not be contacted yesterday, as he was on his way to South Africa for Nelson Mandela’s birthday.
A tie-up would give BA access to Virgin’s sought after take-off slots at Heathrow, which are worth up to £10m each. Competition regulators are likely to be unhappy, however, with a tie-up between the only two British carriers allowed to fly from Heathrow to the US.
BA sources suggested yesterday that a bid of more than £400m for BMI was an alternative possibility. But industry experts suggested that BA has had enough trouble trying to turn around its own loss-making short-haul network without buying another loss-mak ing airline running domestic and European flights.
Sceptics in the industry suggested much of the takeover talk was hot air, with airlines anxious to “talk up” growth prospects during an unprecedented downturn in demand.
It emerged last week that BMI had been discussing closer co-operation with Virgin, with proposals ranging from codesharing, pooled facilities and combining groundhandling to a full merger or takeover. However, when news of the negotiations leaked, BMI insisted that a merger was off the agenda.
Colleagues of BMI’s chairman, Sir Michael Bishop, said he was dismayed at Virgin’s portrayal of the potential deal as a takeover. One source said Sir Michael, 61, had spent much of his life building BMI and would be loath to give up control – any deal would have to be “no worse than a merger”.

We can buy Virgin or BMI, says BA