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Wednesday, October 20, 1999 Published at 07:16 GMT 08:16 UK

Business: The Company File

Anger at airline sale

The row is over the all-important take-off and landing slots

British Airways has reacted angrily to news that its German competitor, Lufthansa, is planning to take a 20% stake in British Midland. It says the deal will give Lufthansa more key take-off and landing slots at Heathrow airport.

BA said: "This is the beginning of the sale of British Midland to Lufthansa and is the start of consolidation in the European airline industry. British Midland is now under German influence.

[ image: BA says the British Midland deal will give Lufthansa an unfair advantage]
BA says the British Midland deal will give Lufthansa an unfair advantage
"It is a sell-out to an alliance which has been given antitrust immunity to share capacity and fix prices over the Atlantic and which carries out volume-related discount selling of its tickets. British Airways has been denied all these privileges.

"Its immediate effect will be to allow not only Lufthansa but also its partner United Airlines to influence the use of British Midland's extensive slot bank at Heathrow. It will, unless regulated, decimate competition on London-Frankfurt and London-Scandinavia routes."

BA is incensed that while its own link-up with American Airlines ran into competition problems, it says the British Midland deal appears to have been "nodded through" by the regulatory authorities.

Star Alliance

As part of the deal, British Midland will join the Star Alliance group of airlines, which includes a number of major carriers including Lufthansa, United Airlines of America, Air Canada and Singapore Airlines.

British Midland would be a valuable addition to the Star Alliance in its battle with Oneworld, the group led by BA and American Airlines which also includes Qantas of Australia, Iberia of Spain and Hong Kong-based Cathay Pacific.

If the agreement goes ahead, Lufthansa will buy half the 40% stake in British Midland owned by the Scandinavian carrier, SAS.

BA's chief executive, Bob Ayling, said: "The Star Alliance will have nearly 24% of the slots at Heathrow and about 70% at Frankfurt."

BA has 38% of slots at Heathrow and only 4% at Frankfurt.

British Midland has recently been running a price campaign under the heading "Make the Air Fair".

Mr Ayling said the campaign was "always dubious and should now be seen as a price raising initiative" with British Midland now "trussed up for sale".

Mr Ayling said it was vital that both the European Commission and the UK government looked very carefully at the British Midland deal.

A full link-up between BA and American Airlines which would have seen the carriers jointly marketing lucrative transatlantic routes had to be scrapped on competition grounds.

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