British Airways owner International Airlines Group (IAG) has agreed to purchase British Midland Limited (bmi) from Lufthansa for £172.5 million.

bmi consists of three distinct business units – bmi mainline, bmi regional and bmibaby – all of which are presently included in the deal.

However, Lufthansa has retained the option to sell bmi regional and bmibaby before completion, leading to a price reduction for IAG.

IAG will pay cash for the loss-making carrier.

Under the terms of the deal, IAG will see its valuable Heathrow presence increase by up to 56 additional daily slots.

Willie Walsh, IAG chief executive, said: “Buying bmi’s mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports.

“Using the slot portfolio more efficiently provides the option to launch new long-haul routes to key trading nations while supporting our broad domestic and short-haul network.”

IAG intends to finance the purchase from its own funds.

Some £60 million of the purchase price will be paid in four installments to Lufthansa pre-completion.

This amount will be secured by Heathrow slots.

“Given the scale of bmi’s losses, there is an urgent need to restructure the business,” continued Walsh.

“Unfortunately, this will mean some job losses but we will secure a significant number of high quality jobs here in the UK and create similar new jobs in the future.”

It is hoped the transaction will be completed during the first three months of 2012, but is subject to regulatory clearance from the European Commission and other bodies.

Lufthansa is considered Europe’s Leading Airline by the prestigious World Travel Awards.

More Information

bmi mainline operates Airbus aircraft to destinations in the domestic UK market, Europe, CIS states, Middle East and Africa from London Heathrow.

bmi regional operates an Embraer fleet and offers short-haul flights within the UK and Europe from seven regional airports. 

bmibaby operates Boeing aircraft and is a low-cost airline flying primarily out of East Midlands and Birmingham airports.

bmi reported gross assets of £284 million as at December 31st, 2010 and a £153 million loss before tax on revenues of £777 million for the year 2010.