Air Transport

BMI chief Nigel Turner is warning that the UK carrier will post its highest-ever losses this year, a plight which has prompted intensified cost-cutting and talk of restructuring.

In an internal memo, distributed to BMI's staff on 26 November, Turner said: "Our financial results this year will produce the largest loss we have ever recorded by a considerable margin."

Turner also cautions that BMI will be "in intensive care" for considerable time, hindered by weakening demand and increasing non-controllable costs such as airport charges.

He adds that BMI's majority owner-designate Lufthansa, which is expected to take an 80% stake in the airline in January, will not allow the business to continue to bleed cash.

"Be under no illusions, they will not be prepared to sit back and watch us lose money," he says. "They will, and do, expect us to reshape the business to remove unprofitable flying to the greatest extent possible."

The 2008-09 results are BMI's first set of full-year financials since the end of its risk-sharing joint venture - known as the European Co-operation Agreement (ECA) - with SAS and Lufthansa at the close of 2007. Both SAS and Lufthansa incurred years of heavy losses through the deal.

BMI's bleak outlook is not entirely unexpected. In a note published earlier this year, ABN Amro analyst Andrew Lobbenberg said: "We think the economic performance of BMI will be severely challenged in 2008 by the recent termination of the ECA."