British Midland to cut costs

BMI is going low cost, not no-frills

The UK's second biggest airline BMI British Midland plans to radically reshape itself to slash costs.

But the company has denied reports in the weekend press that it is to become a "no-frills" carrier like EasyJet or Ryanair.

"BMI remains a full service airline, and we have no intention to become a budget carrier," the company's chief executive Austin Reid told the annual conference of the Institute of Economic Affairs earlier on Monday.

"We are certainly not going to be a no frills carrier.... I think that we do clearly have to look at our cost base, the key to being successful in the airline industry is to get your costs down," he told the BBC.

"We have plenty of fares that are very competitive...We need to make sure that those fares are put in front of the public," he added.

Labour costs targeted

Mr Reid said the airline aims to negotiate lower airport charges and push for more competitive prices from aircraft manufacturers.

It also plans to cut labour costs, although a spokesperson stressed that no further job cuts are planned.

Last month, BMI sacked 600 staff, or 11% of its workforce, and temporarily grounded 8 of its 57 aircraft in a bid to reduce costs.

The company also asked many pilots to work half time in order to reduce payroll costs further.

The airline, which owns 14% of all the landing and takeoff slots at London's Heathrow Airport, started work on the restructuring plan in the summer, according to a spokeswoman.

"We have been restructuring the business to ensure that our operating costs are as low as reasonably possible to ensure we can compete in today's aviation marketplace," she said.

More flights

That will probably mean increasing the number of flights on BMI's most popular routes, including those between London and Edinburgh, Glasgow, Dublin and Amsterdam.

It could also mean closer relationships with its partners in the Star Alliance, a group of 15 airlines which sharing passenger lounges and frequent flyer programmes.

Last week, BMI moved to fill the gap in the market left by bankrupt Belgian carrier Sabena, launching new flights between Brussels, Leeds, and Manchester.

BMI's restructuring plan is due to continue until next year, but full details are not yet available, a spokesperson said.