British Airways franchise operator BMED is close to sealing a deal which will see Lebanese investors effectively take over the carrier and inject £30 million ($59 million) of equity.
BMED had been looking for new investors before last year's war in Lebanon, which hit some of the carrier's key markets, especially London-Beirut. "We have had a difficult winter, although the Christmas period was good," says BMED chief executive David Richardson.
The deal will be led by a subsidiary of the M1 Group, which is owned by Lebanon's Mikati family and is involved in various business ventures including in telecommunications. Maher Mikati, son of a former Lebanese prime minister, is playing a key role in the negotiations.
Richardson says the Mikati family's knowledge of BMED's key markets was an important part of the deal, given the tendency for BMED to operate in difficult parts of the world. In addition to operating eight weekly flights to Beirut, BMED serves Amman in Jordan, Tehran in Iran and Aleppo and Damascus in Syria. It also serves five destinations in northern and western Africa and seven in central Asia.
"They are familiar with the places we operate and were able to take a view this is not an investment for the casual investor," notes Richardson.
The £30 million of equity will be used to reduce debts and fund the carrier's five-year business plan. The carrier is looking to expand into new markets, fitting its long, thin business-orientated route profile. The carrier launched services to Dakar and Freetown in West Africa last year, an area with strong Lebanese business connections. "We are looking to spread the risk profile," says Richardson.
BMED holds valuable slots at BA's London Heathrow hub and operates a fleet of five Airbus A321s and three A320s. It has five more A320 family aircraft on order.
Before the war in Lebanon, existing shareholders, including Syrian-born businessman Safiq Waid and Lord Hesketh, had indicated they were unwilling to fund the carrier's expansion plans. Waid and Hesketh, along with the remaining shareholder base, mainly small Middle Eastern investors, had originally expected to retain around 30% of the equity, but with the value of the airline being downgraded after the Lebanese war, the share will be significantly lower than expected.
"While the proposed transaction is severely dilutive of present shareholders' interests, the board is confident that the proposal, albeit yet to be finalised, is in the airline's best long-term interests," the carrier says.