BMI is here to stay

British Midland Airway’s CEO, Wolfgang Prock-Schauer, is adamant that the airline “is here to stay”.  The comment comes amidst a background of speculation that the airline’s parent company Lufthansa is planning to break up the subsidiary.

The airline has warned that its 2009 losses will be worse than the previous year’s pre tax loss of £157.3 million.  However, restructuring plans are in place to halve this deficit in 2010.

Following Mr Prock-Schauers appointment in November last year the airline has introduced an aggressive restructuring programme.  The predicted savings are £100 million annually.  The CEO said that “there was obviously a problem” with the airline and this resulted in significant losses at the beginning of the recession.

Mr Prock-Schauers used these restructuring plans to encourage share holders, employees and customers that the airline’s future was assured.  The cost cutting involves losing 800 jobs, reducing capacity by up to 25% and refocusing the airline’s network.  The airline added that the majority of the job losses have already been identified.  The programme has the backing of the Unions and employees.

When Lufthansa was forced to reluctantly take over the British carrier in 2009, much of the talk centred around the precious London Heathrow take-off and landing slots it had ownership of.  BMI currently owns 11% of all slots at the UK’s largest airport, second only behind British Airways with 40%. 

Lufthansa bought, then owner, Michael Bishop’s majority share in the airline due to an option that was exercised, previously agreed upon in 1999.  Several other carriers were interested in the purchase including British Airways and Virgin. 

Mr Prock-Schauers said that BMI is no longer up for sale and that the airline had secured two loans from Lufthansa that would ensure they have the time to complete the restructuring required. 

Source: The Wall Street Journal