London’s Heathrow Airport is facing a rather interesting offensive at the moment.
Long recognised as Europe’s most profitable airport for carriers to operate from, the golden currency has been the airports "slots," or landing positions. They trade on an open market for hundreds of thousands, and each slot offers its owner the opportunity to land or take off. An example of their value is seen in the rapid decrease in the intra-Britain and short -haul flights operated by small aircraft; the slot can be used for any sized plane, and it is more profitable to use it for 120 seats than 50.
Now, the game is changing fast. Last week, Lufthansa, the German carrier, completed a nine-year deal to purchase the 50% shareholding in bmi (formerly British Midland, and the UK’s second carrier) from Sir Michael Bishop; Sir Michael had a marvellous payday and pocketed some $700 million for his share, not bad for an airline in these recessionary times. It was a price, however, that had been agreed some nine years earlier at a meeting held in Tokyo between the heads of the major Star Alliance partners. Their quest; to wrest some control of london’s airport from arch-rival British Airways.
And now they, through Lufthansa control 17% of the slots at Heathrow. The difficulty is that the world has changed considerably since 1999, and the addition of this mid-sized airline to the Lufthansa portfolio may not be entirely welcome at this stage in the aviation business cycle. However, they now own it.
The rumour mill is rife; will they make a move for Singapore Airline’s 49% share in Virgin? Will they simply consolidate? Or, even more interesting if less probable, will they mount an attack on British Airways’ much-shrunken shares and try to buy London completely?
Who knows, but it is clear that something very interesting is afoot at Heathrow.