BMI to launch low-cost airline

BMI plans to compete head-on with discount airlines

BMI British Midland plans to launch a low-cost airline in time for Easter.

The airline will operate out of its East Midlands hub, flying to European destinations including Barcelona, Nice, Palma, Malaga, Alicante and Faro.

Destinations for new airline

Barcelona

Nice

Palma

Malaga

Alicante

Faro

The announcement comes at a tough time for traditional, full-price carriers, which have suffered a sharp drop in demand after 11 September on top of earlier problems.

Discount airlines are riding out the downturn by stimulating volume on certain routes with cut-down prices.

Both Easyjet and Ryanair have seen passenger numbers increase in recent months, while woes continue to mount for traditional airlines.

On Wednesday, British Airways told the BBC it was slashing short-haul routes and attempting to refocus on trans-Atlantic business customers.

Net discount

BMI said tickets would be priced competitively with other discount airlines and could start at £25 each way.

BMI is launching this new airline in response to a clear market opportunity and consumer demand

Nigel Turner
BMI finance director

Further discounts will be offered for fares booked over the internet.

The new airline will be set up as a subsidiary of BMI, which will continue to operate its full-service, scheduled service alongside the budget airline.

Bookings for the new airline will begin later this month, with a service due to start on 23 March.

Separate venture

The discount airline will be set up as a separate venture, but will be supported by existing BMI resources and staff.

The company's finance director, Nigel Turner, will take responsibility for the new airline at board level.

He is not, however, the airline's chief executive designate, stressed the spokesman.

"BMI is launching this new airline in response to a clear market opportunity and consumer demand," said Mr Turner.

Surprise announcement

BMI's announcement on Thursday seems to contradict denials by chief executive Austin Reid last autumn that it would become a low-cost airline.

I don't think that Austin Reid was being disingenuous, he was just rather misunderstood

BMI spokesman

"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," Mr Reid told the BBC in November.

The company spokesman defended Mr Reid by saying that BMI would continue to offer its full-service airline.

"I don't think that Austin Reid was being disingenuous, he was just rather misunderstood," he told BBC News Online.

BMI's full-service airline still plans to break into the trans-Atlantic route if air regulations, such as Bermuda II, are revised.

"Nothing changes at all for BMI's full-service airline," said the spokesman.

The company will release more details on the new airline - including its name, livery, additional destinations and introductory ticket offers - next week.

Lessons learned

BMI is also determined not to "make the same mistakes that British Airways made," said the spokesman.

BA set up the low-cost airline, Go, but then admitted its strategy to compete in both the full-service and no-frills markets was not working.

It sold Go for a profit last year.

"[BMI] is a different creature from British Airways," said the spokesman, adding that the new airline would only be run from the East Midlands airport to keep costs down.

"It won't be a massive mega-hub with a regional network," he said.

Go challenge

BMI itself is also currently challenging Go, which recently announced plans to operate flights from East Midlands airport, BMI's home base.

BMI is questioning Go's application to fly from the East Midlands to Prague by seeking clarification on a bilateral capacity agreement between the Czech Republic and the UK.

"We are concerned about the wider issues as well," said Simon Gregory, BMI's marketing director.

The company is also looking for clarification on other agreements between the UK and European countries outside the EU.

BMI is the second largest airline in the UK, after British Airways.