British Airways owner IAG has announced a deal to buy German rival Lufthansa's UK unit BMI for £172.5 million (€207 million) in cash, and said jobs would go as part of an urgently-needed restructuring of the loss-making carrier.
But Virgin Atlantic, which tabled a competing offer earlier this month, said it would ask anti-trust regulators to block the deal as it would stifle competition and push up prices.
"We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry, and bad for Britain," Virgin's Richard Branson said.
The deal gives IAG another 56 daily take-off and landing slots at Heathrow, Europe's busiest airport, which is operating at full capacity after plans to build a third runway were scrapped. IAG currently holds 43.1 per cent of the slots at Heathrow and would have around 52 per cent of the hub's slots if its bid for BMI gets approval from regulators.
"Buying BMI's mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports," IAG's chief executive Willie Walsh said in a statement.
"Using the slot portfolio more efficiently provides the option to launch new longhaul routes to key trading nations."
The group, which also owns Spanish carrier Iberia, said absorbing BMI's runway slots would give it the option of launching lucrative new long haul routes from Heathrow, and that it aimed to complete the deal by March.
Lufthansa has the option of selling the airline's BMI Regional and BMIbaby units before the deal completes, and IAG will pay a significantly lower price if those businesses are offloaded, IAG said today, unveiling details of a deal agreed in principle in November.
"Given the scale of BMI's losses, there is an urgent need to restructure the business," Mr Walsh said.
"Unfortunately this will mean some job losses but we will secure a significant number of high quality jobs here in the UK."
IAG, which also owns Spanish carrier Iberia, had faced competition to buy BMI from Richard Branson's Virgin Atlantic, which tabled a rival offer earlier this month
Reuters