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Wed, May 28, 2003

What's This? BMI and Virgin Talking Merger?

Strange Times Make For Strange Bedfellows

British Airways, the official carrier of the United Kingdom, is trying to figure a way to scuttle talks between British Midlands Express and Virgin-Atlantic. Virgin-Atlantic is looking for a struggling airline to take over so it can better compete with BA, Europe's largest carrier.

Don't Count Your Chickens Just Yet, Sir Richard

BMI and Virgin-Atlantic have held several negotiations over the past couple of weeks, but the talks now appear stalled. The two airlines can't agree on a price for the takeover, but a Virgin spokesman said the talks would resume soon. Putting BMI under Virgin's wing would allow the new entity to compete with British Airways across the board - on short-haul domestic flights as well as long-haul international routes. As long as those talks are ongoing, BA executives are nervous.

BA was "not ruling anything in, not ruling anything out," but did call its executives from the world over back to London for emergency talks. Does that mean BA might want to takeover the new Virgin-BMI operation? At Virgin, they call that the "flying pig" scenario, but a BA spokesman insisted it could happen. "BA is a public company. We can make a hostile bid for them and there is nothing at all they can do about it. But Virgin is 51 percent owned by Sir Richard [Branson, above]. He has no plans to sell, only plans to expand."

The Naked Truth

But one London newspaper, The Observer, indicated both Virgin and BMI are too debt-ridden to be very appealing to British Airways. In an analysis article, the Observer wrote, "The competition issues arising from a merger of bmi and Virgin are relatively limited. Between them they have 16 percent to 19 percent of landing slots at Heathrow - still only half what BA has."

FMI: www.virgin-atlantic.com, www.flybmi.com, www.britishairways.com

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