ANALYSIS: EC green light for BMI acquisition leaves Virgin out in the cold

London
Source:
This story is sourced from Pro
See more Pro news »

Virgin Atlantic's hopes of disrupting International Airlines Group's (IAG) purchase of BMI from Lufthansa look increasingly forlorn, following regulatory approval of the deal by the European Commission (EC).

Opting to appeal the decision, which Virgin says was "agreed at lightning speed", its president Sir Richard Branson says: "We will challenge every aspect of this process which, if allowed to stand, will undoubtedly damage the British airline industry for years to come."

He claimed that competition regulation should protect the customer from "monopoly situations where companies can set whatever prices they like and stop investing in their product". The appeal process will not suspend the deal, but could force the EC to make another decision if it is successful.

However, Howard Wheeldon of Wheeldon Strategic Advisory believes that Virgin's complaint - that the EC took just thirty-five days to wave through the deal - is "clutching at straws". He feels the appeal "may buy Virgin more time and publicity, but very probably little else".

He says that the time period was "surely long enough for the EC to decide on behalf of all airline customers that a balanced, competitive structure should be maintained at Heathrow, and [to decide] how to ensure that any proposed deal to acquire BMI would protect this".

Wheeldon says that the EC "wasted no time in ... deciding whether IAG should be allowed to acquire the troubled airline, [and this] should be welcomed rather than criticised".

Director of aviation strategy at Mott MacDonald, Laurie Price, echoes the sentiment that the appeal is likely to gain Virgin some publicity, but nothing else. While acknowledging that Virgin was obliged to contest the sale of BMI, which provided it with independent feed for its long-haul services at Heathrow, he says: "Did BA object when Singapore Airlines took a stake in Virgin? There's an ownership and control issue to be taken into account as well as dominance."

Wheeldon believes that the acquisition of BMI by IAG "may be seen by many as another lost opportunity" for Virgin Atlantic. But he adds that this does not mean it should have braved the potentially large risk and sought to acquire BMI itself.

He describes it as a pity that "Virgin Atlantic prefers to concentrate too much effort attempting to halt the progress of its competitors, rather than doing what they're doing and seeking out partnership deals with other international airlines. Whether they're prevented from doing so because of the shareholding structure is anybody's guess," he adds.