FRANKFURT (AFP) — Germany's leading airline, Lufthansa, said on Wednesday it would take over carrier BMI, giving it a strong foothold in Europe's biggest airport even as it acknowledged a sharp drop in third quarter results.
Lufthansa's stake in BMI, formerly known as British Midland, will soar to 80 percent after BMI chairman Michael Bishop exercised an option to sell his stake of 50 percent plus one share to the German carrier, a statement said.
Scandinavian Airlines (SAS) owns the remaining 20 percent of BMI, which holds slots at London's Heathrow airport worth around 770 million pounds and runs lucrative trans-Atlantic flights.
The deal makes Lufthansa the second biggest carrier at Heathrow, the busiest European hub, after British Airways.
Lufthansa's Frankfurt hub is the third largest in Europe, after Paris Charles de Gaulle.
The German airline said that the BMI deal would "become effective probably in January 2009."
Lufthansa was understood to be paying around 318 million pounds for Bishop's stake, according to the Press Association.
Lufthansa has been involved in several other possible European deals after already buying Swiss and Brussels Airlines.
The Italian government sounded out Lufthansa as a potential partner in Alitalia, and the German airline is also a front runner in bidding for the Austrian carrier AUA.
Lufthansa chairman Wolfgang Mayrhuber said on Wednesday that "we see the current crisis as a constructive situation and we see opportunities for consolidation".
He added that the method of BMI's integration into the Lufthansa structure was "currently under discussion."
Mayrhuber spoke in Frankfurt during a presentation of the airline's third quarter results.
On Tuesday, Lufthansa cut its 2008 operating profit target to 1.1 billion euros owing to "record" fuel costs, weaker demand and the global financial crisis.
"Swiss will not attain this year the level of passenger traffic seen last year," Lufthansa financial director Stephan Gemkow said.
Its third quarter net profit plunged by 75 percent to 149 million euros, while operating profit shed 53.4 percent to 279 million euros.
"This is a respectable result taking into consideration the considerable strains being felt as a result of the ongoing crisis in the financial markets and the overall economic situation," Mayrhuber said.
Looking ahead, he said: "Rigorous cost management will always be on the agenda," but added that "we do not foresee outright firings."
"We are working on our productivity, our measures to improve fuel consumption and the reduction of external costs," the Lufthansa boss said.
Airlines have seen some relief as oil prices have fallen from record highs in July but it has not been enough to boost their latest results.
Airlines worldwide are expected to lose around 5.2 billion dollars this year owing to sharply higher oil rates and declining demand, the industry association IATA said on October 17.
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