British Airways is considering a possible bid for BMI British Midland, in a move that would increase its dominance of flights in and out of Heathrow airport.

Tentative discussions are believed to have taken place between Martin Broughton, BA’s chairman, and BMI’s German owner Lufthansa. Broughton flew to Germany last week with Roger Maynard, BA’s director of investments and alliances. Virgin Atlantic and Etihad Airways, the United Arab Emirates airline, are also believed to be examining a possible offer. Any deal with Lufthansa is viewed as secondary to BA’s continuing merger talks with Spanish rival Iberia. Broughton is due to fly to Madrid this week

BA’s finances remain stretched, although the immediate strains on the group’s balance sheet were eased by a recent convertible bond issue and bank debt deal that raised £685m. Industry sources said it may be possible for BA to finance an offer for BMI through a share issue.

Lufthansa is keen to sell BMI, which is losing about £100m a year and has a big pension deficit. It was forced to buy the remaining shares in the airline earlier this year from Sir Michael Bishop, its founder, because of a long-standing agreement.

Source timesonline