AP

FILE -The August 2008 file photo shows British Midland Airways (BMI) aircraft parked at London's Heathrow Airport. Germany's Lufthansa signed an agreement Thursday, Dec. 22, 2011, to sell its loss-making British Midland, BMI, subsidiary to the parent of rival British Airways in a deal worth as much as 172.5 million pounds (US dollar 270 million). (AP Photo/Str, File) - UNITED KINGDOM OUT, NO SALES, NO MAGS -

Myles Neligan London

british Airways (BA) owner IAG has agreed to buy Lufthansa’s British unit, bmi, for £172.5 million (R2.2 billion), seeing off rival bidder Virgin in the race to grab loss-making bmi’s coveted runway slots at London Heathrow.

The all-cash deal, which requires regulatory approval, would give IAG more than half the daily take-off and landing slots at Heathrow, Europe’s busiest airport, which is operating at full capacity after plans to build a third runway were scrapped.

Virgin Atlantic, which tabled a rival offer for bmi earlier this month, said it would ask antitrust regulators to block the deal as it would stifle competition and push up prices. “We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry, and bad for Britain,” Virgin founder Richard Branson said yesterday.

IAG holds 43.1 percent of the slots at Heathrow. This would rise to about 52 percent if its takeover of bmi gets the go-ahead from regulators.

That compares with Lufthansa’s two-thirds share of the runway slots at Frankfurt, and Air France-KLM’s 59 percent at Charles de Gaulle in Paris and 57 percent of Amsterdam’s Schipol, and suggests regulators are likely to approve the deal.

“In terms of dominance and position at a primary hub this would not be setting a new boundary,” said Investec analyst Andrew Fitchie.

“Expect a bumpy ride, but realistically they’re not setting new records here.”

IAG said absorbing bmi’s runway slots would allow it to launch lucrative new long-haul routes from Heathrow. The deal should be complete by March, and would contribute to earnings from 2014 at the latest, the company said.

Chief executive Willie Walsh said there would be “some job losses” as part of an effort to turn around ailing bmi, which last year racked up pretax losses of £153m.

“We’ve put a lot of time and effort in getting to this point in the process, and we wouldn’t have done that if we thought it was impossible from a regulatory point of view,” Walsh said.

IAG shares were up 2.3 percent at £1.48 at 11.40am, outpacing a 1 percent rise in the FTSE Eurofirst 300 index of top European shares. Lufthansa gained 1.3 percent in Frankfurt.

“I think this is a highly positive strategic move for IAG because it delivers a big boost to its presence in what is arguably the world’s most attractive aviation market,” said Douglas McNeill, an analyst at stockbroker Charles Stanley.

“I think Lufthansa will regard the price as quite a good outcome for them as well because they’ve managed to get a cash price for something that is heavily loss-making.”

Lufthansa had an option of selling bmi’s “bmi regional” and “bmibaby” units before the deal was sealed, and IAG said it would pay less if those units were not offloaded. – Reuters