Pressure mounts on BA as British Midland picks global partners

BRITISH MIDLAND, the country's second-biggest scheduled airline, is this week expected to sign up with one of two competing world airline alliances in a move which will put further pressure on British Airways.

BRITISH MIDLAND, the country's second-biggest scheduled airline, is this week expected to sign up with one of two competing world airline alliances in a move which will put further pressure on British Airways.

The decision could come as early as today following a meeting of the British Midland board, led by its chairman Sir Michael Bishop, to review the airline's options.

Weekend reports suggested British Midland had decided to go with the Star Alliance, led by Lufthansa and United Airlines, in preference to the alliance of Air France and Delta Airlines. However, Sir Michael insisted last night that no decision had yet been made. "This has been an exceptionally close-run thing. They are nose to nose," he said.

Some observers believe that a tie-up with the Star Alliance would make more sense as SAS, one of the existing members of Star, already owns a 40 per cent stake in British Midland. However, Air France has made a strong case for British Midland joining its grouping. The KLM-NorthWest-Continental alliance is out of the running.

Either alliance would deliver British Midland the international reach it needs, particularly in the US where the airline plans to launch services next year. It would also result in increased competition for BA at Heathrow where British Midland is the second-biggest operator with 14 per cent of the take-off and landing slots.

If Sir Michael teamed up with Lufthansa and United, Star would have 24 per cent of slots at Heathrow compared with BA's 38 per cent.

Whichever alliance he choses, Sir Michael will remain in control of British Midland. He currently holds a 60 per cent stake in the business. If Star is selected, Lufthansa could emerge with a small stake in British Midland, although this could come from SAS's existing holding.

British Midland is also planning to change its name and corporate identity to coincide with the move into the transatlantic market. It currently styles itself as "the airline for Europe" but this will no longer be appropriate if it gets the authority to launch the four US routes it has licences for. However, the final report on the corporate review has not been submitted and no decision is likely until next year.