BMI US Services In Doubt (FT)

Mon Feb 18, 2002 3:29 am

Report from the FT; speculative, but note BMI did not 'rubbish' the article; a shame, but the doubts raised in the article don't surprise me.

'BMI British Midland is considering scrapping its nascent US services as losses mount following the sharp decline in traffic in the transatlantic market in recent months.

The company's faltering commitment to its lossmaking services from Manchester to Washington and Chicago became apparent after it emerged it had held talks with at least one other airline about leasing its three long-haul aircraft.

BMI and DAT, the successor airline to Belgium's bankrupt Sabena, confirmed they had held discussion about the lease of the UK airline's three Airbus A330 aircraft, but had failed to reach a deal.

DAT, which was renamed SN Brussels Airlines at the end of last week, would have used the aircraft to fly to African destinations.

The launch of US services last spring marked an ambitious move by BMI to expand beyond its core market. The flights remain the only long-haul scheduled services in an otherwise exclusively European network.

A withdrawal from the US would come as a blow to Sir Michael Bishop, BMI's chairman, who championed the company's move into long-haul services, despite misgivings among other shareholders.

Sir Michael controls 60 per cent of BMI, while Germany's Lufthansa and SAS, the Scandinavian airline, both own 20 per cent.

Sir Michael's was hoping to start transatlantic services out of London's Heathrow, where BMI is the second largest airline, as soon as the US-UK aviation agreement was renegotiated.

But hopes that London and Washington would finally liberalise the accord, which prevents BMI flying to the US from Heathrow, were dashed last month after the UK government pulled out of talks, following the decision by American Airlines and British Airways to abandon their proposed joint venture.

BMI and its US partner, United Airlines, which jointly markets the Manchester services under a codeshare agreement and meets about half the operating costs, continue to push both governments to approve their joint venture out of Heathrow.

BMI insisted that despite the talks with DAT, it had "no plans to pull out" of its US services. But added: "Giving a categorical assurance that these Manchester services are safe and secure without the prospect of Heathrow services starting is very difficult."

BMI's US services are losing money. Even in the best market conditions it can take an established transatlantic airline two years to make a new route profitable.

But after the September 11 attacks, demand dropped by more than 30 per cent and is still only gradually recovering.

BMI currently uses only two of its three A330s, worth about $130m each, on its US operations. The other aircraft is sitting on the tarmac in Manchester after returning from a short-term lease with SAS, and the airline is due to take delivery of a fourth A330 later this year.'


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RE: BMI US Services In Doubt (FT)

Mon Feb 18, 2002 3:44 am

My cousin flew them a few weeks ago from IAD-MAN and return. On the flight over one of the cabin crew told him that things were starting to pick up again. When he flew back from MAN a cabin crew told him that things were vastly improving, especially with cargo. So we shall see. I wonder if the article isnt some kind of pressure on the authorities to approve the UA/BMI anit trust agreement.Hard to say.
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RE: BMI US Services In Doubt (FT)

Mon Feb 18, 2002 3:56 am

I cant see BD giving up now when the economy is improving
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Joined: Mon Nov 13, 2000 4:06 am

RE: BMI US Services In Doubt (FT)

Mon Feb 18, 2002 5:40 am

How ironic. They wanted permission to fly from LHR - USA but were blocked by the US (and the UK). Now they're being "blocked" by poor US traffic.

A sad story.
Anyone can fly, only the best Soar.