Blow to Lufthansa as BMIbaby bidder drops out

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Lufthansa's efforts to sell loss-making BMI have suffered another setback, with the front-runner in the sale of low-cost subsidiary BMIbaby dropping its planned bid.

German turnaround specialist Intro Aviation tells Flightglobal that Lufthansa has rejected its non-binding offer for BMIbaby, bringing an end to negotiations between the two parties.

"Our interest remains valid, therefore possible further discussions with IAG in case of their takeover could make sense," says Peter Oncken, Intro's managing director.

IAG last month won regulatory approval from the European Commission (EC) for its takeover of BMI, which it has offered to purchase for £172.5 million ($275 million).

However, IAG chief executive officer Willie Walsh has made it clear that the London-based company has no interest in acquiring BMIbaby, and it will expect a significant discount if Lufthansa fails to offload the low-cost subsidiary.

IAG's bid for BMI also faces headwinds from rival transatlantic carrier Virgin Atlantic, which has said it will appeal the EC's decision on competition grounds.