LUFTHANSA, the German flag carrier, yesterday said it will focus on turning round its loss-making airline BMI as it emerged that potential buyers had failed to agree an acceptable price.
Wolfgang Prock-Schauer, who joined BMI yesterday and will take over as chief executive in December, will now sit down with the board to restructure the stricken airline.
Analysts say Lufthansa would need to sell the airline for about £500 million
to recover its investment and cover BMI's losses this year. BMI owns about 11 per cent of landing slots at Heathrow, the world's busiest international airport, and these have long been considered its greatest asset. But it is understood potential buyers, which include British Airways, have been unwilling to offer anywhere near the £500m price tag.
The news came as Michael O'Leary, the chief executive of budget airline Ryanair, warned that he was ready to tear up its growth strategy and return more cash to shareholders if it fails to agree a deal to buy new planes from Boeing before the end of the year.
O'Leary said that he had made "little progress in our discussions with Boeing for 200 new aircraft for delivery between 2012 and 2016".
He added: "We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme by passing on some of the enormous savings which Boeing have enjoyed both from suppliers and more efficient manufacturing in recent years
"...if Boeing doesn't share our vision, then I believe Ryanair should change course before the end of this fiscal year and manage the airline over the next three years to maximise cash for distribution to shareholders."
The strategy would represent a major U-turn for the airline and may deter investors who had bought shares for growth. It is similar to that adopted by EasyJet, which has indicated that it will slow its purchases of new aircraft in the current recession.
O'Leary said pre-tax profits were 419.4m (£376.6m) in the six months to 30 September, from 105.2m last year, but admitted the results were "heavily distorted" by a 42 per cent drop in fuel costs. This masked a 17 per cent decline in average fares and warned that prices would fall 20 per cent over the rest of the year, resulting in losses for the last two quarters.
Ryanair's results will contrast with those of British Airways later this week, forecast to unveil record losses of £250m amid ongoing disputes with staff over changes to working conditions.
Yesterday the Unite union warned that BA staff could strike at Christmas unless a plan to impose job cuts and changes in work patterns is cancelled.
