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IAG to Gain Monopoly with BMI Purchase

International Airlines Group (IAG) LogoAs most people already know, International Airlines Group (IAG) has just recently announced that it has struck a deal to buy the ailing airline known as BMI. Apparently, they are going to buy this down-and-out airline for some £172.5 million. Of course, this brings up a good question: Why would anyone care if IAG buys an airline that is loss making? Why would this give the airline a monopoly of any kind?

Really, it has nothing to do with BMI itself. It actually has to do with what BMI owns. With the purchase of BMI, IAG also gets all the airline’s slots at Heathrow Airport. This is a very important airport, and one that IAG already holds the majority of slots at. Virgin Atlantic says that ticket prices are going to rise if IAG is allowed to buy BMI.

It is important to note that IAG has not totally won BMI just yet. In fact, the only thing that has been agreed on is the sum that will be paid. In order for this deal to go through, the airlines are going to have to get regulator approval. Despite claims that this could lead to a monopoly, some experts are confident that IAG is going to be able to buy this airline no problem.

Of course, just because Virgin Atlantic lost out on the bid, they are not prepared to let IAG just come in and scoop up BMI without a fight. In fact, Sir Richard Branson says that Virgin Atlantic would be fighting this monopoly every step of the way.

So what is the agreement that has been set? Right now, IAG will be able to acquire the loss-making airline, which was formerly known as British Midland Airways, from Lufthansa. After the deal is done, IAG will then gain the rights to 56 more slots at the extremely popular airport Heathrow. That is where the trouble comes in.

In fact, IAG does not even plan on keeping all BMI staff. The chief executive of IAG Willie Walsh has already warned that there will be some job losses as a result of this deal. There is just no way around it. That being said, it is still far too early to say just how many posts will have to go. Overtime, this deal could actually lead to more jobs. It will just take time for the airline to work back up.

Alright, so this all leaves just one more question to be answered: Just how many slots at Heathrow will be controlled by IAG after this deal? Overall, more than half the slots at Heathrow Airport will belong to IAG. Experts say that the company will control about 53 percent overall. This is very close to the 66 percent of slots that Lufthansa holds at Frankfurt airport and the 59 percent that Air France holds at Paris’ Charles De Gaulle Airport.

 

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