IAG on Friday it had reached an agreement in principle for the sale of bmi with Lufthansa. It expects the purchase agreement to be signed in the coming weeks and for a transaction to be completed in the first quarter of 2012.
The deal is likely to signal the end of the Bmi brand as IAG – formed from the merger of BA and Iberia – is only interested in Bmi's Heathrow slots. Bmi owns 8.5pc of the slots at Europe's busiest airport.
Lufthansa is keen to offload the loss-making Bmi, which it was forced to buy from Lord Bishop for around £300m in 2009 after he exercised a put option.
The German airline has failed to turn round Bmi, whose losses widened to €154m (£133m) from €90m in the first nine months of this year. Last week Lufthansa said it was considering multiple bids for Bmi.
IAG has always been seen as a natural buyer for the business but any deal faces two key obstacles – Bmi's £180m pension deficit and BA's existing 40pc-plus share of slots at Heathrow.
The price of any deal will depend on the extent of the pension liabilities and potential closure and redundancy costs IAG is willing to assume.
IAG may also be prepared to offload some slots to Sir Richard Branson's Virgin Atlantic, which also coveted Bmi, to avoid a competition complaint and drawn-out inquiry.
The Telegraph UK