Airlines of Britain Holdings (ABH), which owns British Midland (BM),has split off its regional airlines into a separate grouping, in a move designed to free the operations to increase their franchise links with British Airways as BM moves closer to Lufthansa.
The bulk of ABH's regional operations, which include Manx Airlines and Loganair, are now flying as part of the BA Express franchise network, under the British Regional Airlines (BRAL) banner. The Business Air operation, which ABH rescued a year ago, is also being integrated into the growing BRAL network.
ABH says that the grouping had sales of ú151 million ($245 million) in 1996 and employed 1,450 staff. Its fleet now stands at three British Aerospace 146s and 54 turboprops, soon to be joined by five Embraer EMB-145 50-seat regional jets.
BRALhas clear ambitions to make the most of franchise opportunities emerging from BA's re-evaluation of its own regional operations. "We see our future as firmly in the BA camp," says Terry Liddiard, who heads BRAL.
The latest move aims to aid those relations by distancing BRAL from the potential conflicts of interest raised by the position of its sister company, which is BA's main rival on European routes from London Heathrow.
The de-merger of BRAL also removes links to the competing Lufthansa/United/SAS alliance, through the SAS holding in ABH. Although SAS will continue to hold 40%in BM, it has agreed to relinquish interests in the regional operations.
Without the complication of the SAS shareholding, there are suggestions that Loganair's management could revive attempts to stage a buy-out of the airline, which runs inter-island services in Scotland.
The de-merger also helps clear the path to links between BMand Lufthansa. Talks are understood to be taking place over the possibility of BM taking on some secondary routes between Heathrow and Germany, although both sides have played down speculation of an impending transfer of the SAS shareholding to its German partner. SAS also has first refusal on buying the remaining ABH shares if they come up for sale.
Lufthansa has made clear that it has a potential long-term interest in acquiring a holding in BM, but sources within the airline say that the prime focus remains on co-operation at an operating level.
An alliance between the two would strengthen the Lufthansa/ United presence at Heathrow, where BM holds second position to BA with around 13% of the airport's increasingly valuable slots. "Lufthansa's benefits from a multi-hub strategy would be clear and BA would find it difficult to respond," says Chris Tarry, airline analyst at securities house Dresdner Kleinwort Benson.
Source: Flight International
