Troubled bmi eyes drastic cost cuts

By KARL WEST
Updated:

Cash-starved airline bmi is set to reveal a series of harsh cost-cutting measures that could include hundreds of job cuts and some route closures.

The Heathrow-based carrier has taken a hammering on some of its routes.

Sources suggested it is working on a strategy that could see it beef up its presence on Eastern European routes where there is less competition from the big network carriers - including Heathrow to Moscow.

bmi

Fight for survival: The cash-starved airline may axe hundreds of jobs


As recently revealed by the Daily Mail, the loss-making carrier's finances are in a parlous state, recording a loss of £155.6million last year.

It has also been forced to seek a £95million handout from its German parent Lufthansa, and said it needs a further £95million to see it through to the end of October 2010.

Sources indicated Lufthansa's top brass have ordered bmi to take swift action to slash overheads and drop some loss-making routes in order to stabilise the business.

Lufthansa bought founder Sir Michael Bishop's majority stake in bmi for around £220million earlier this year. The Frankfurt carrier has since also bought out Scandanavian airline SAS's 20 per cent stake.

Bmi's latest annual accounts recently revealed the management team has prepared a 'detailed and achievable recovery plan' to nurse the carrier back to profitability by 2012 'at the latest'.

The firm is desperately trying to raise the cash it needs and is in 'significantly advanced' talks with several rivals who might buy some of its prized take off and landing slots at Heathrow.

Bmi is the second biggest operator at the West London hub after BA, with about 11 per cent of the slots.

Those slots are estimated to have a market value of £616million, much less than the £770million they were worth at the end of 2007.

Lufthansa had considered selling the airline and even allowed rivals, including British Airways and Virgin Atlantic, limited access to bmi's accounts.

However, the Germans have shelved the plan after realising it is unlikely to get a full price in the current turbulent market.

It is thought Lufthansa is planning to streamline and restructure the business to move it back into the black before hoisting a for sale sign over it.

A spokesman for bmi declined to comment.

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