Virgin boss Richard Branson quickly denounced the move as "anti-competitive" and said he would raise the issue with the Office of Fair Trading.

British Airways said it planned to buy its Gatwick-based franchisee for £75m.

Mr Branson said he was approached "last spring" by HSBC, as advisors to independent airline CityFlyer Express Ltd.

He said: "HSBC approached us in the spring to ask if we wanted to buy CityFlyer. We said we would like to buy it.

"HSBC never came through with a price despite numerous telephone calls from Virgin."

BA chief executive: "No job losses foreseen"

"We can only assume that BA has some kind of secret, anticompetitive pre-emption right in their franchise agreement with CityFlyer, and that we were being used as a stalking-horse," he added.

Mr Branson said "This deal will create another regulatory quagmire for BA. It will give them complete and utter dominance of Gatwick airport on top of their existing dominant position at both Heathrow and Gatwick.

"I will raise this issue with John Bridgeman when I see him tomorrow at the Office of Fair Trading," where a meeting is already scheduled to discuss airline regulation," he added.

'No hidden agenda'

British Airways will buy CityFlyer Express from a group of institutional shareholders, led by 3i Group.

The deal brings together the two biggest operators at London Gatwick.

Last year CityFlyer made a pretax profit of £6.4m on sales of £89.4m.

BA denied the deal meant it was planning for CityFlyer to take over its other less profitable shorthaul routes at Gatwick, operated by its EuroGatwick subsidiary.

CityFlyer was the first of several airlines to adopt the BA livery as a franchisee operator five years ago and now flies a fleet between Gatwick and cities in the UK and northern Europe.

"Today's news is all about buying a business that was up for sale and in which a lot of parties were interested," a BA spokesman said.

Media reports earlier this year suggested that BA's main interest in buying CityFlyer was to get its hands on another bank of runway slots at Gatwick at a time when London's second airport was becoming increasingly congested.

CityFlyer is the airport's second biggest operator behind BA, accounting for 12.8% of all flights at Gatwick last year, compared with BA's 28.6% share.

But BA said the offer to sell the airline came from CityFlyer's venture capitalist shareholders who had decided the time was ripe to cash in on their investment.

Business as usual

"The message for our staff is it's 'business as usual'," CityFlyer's managing director Brad Burgess said. "There will be no changes to employment levels as a result of today's announcement...and the existing arrangements we have with local suppliers will remain in place."