Reported earlier today in the UK, Lufthansa has sold its stake in BMI to IAG, the parent company for British Airways and Iberia. Specific terms have not been disclosed and the sides hope to have the deal closed by Spring of next year. Virgin Atlantic in the past said that it would oppose such a deal since it would aide their main rival, British Airways.

Virgin Atlantic says that is not done in its pursuit of BMI as reported on flightglobal.com. It will interesting to see how this plays out. Seeing that BMI has several components to its corporate structure, there may be pieces that are available to Virgin. As a Star Alliance Flyer, I would love to see Virgin join the Alliance and use this opportunity as its conduit.

A merger like this is subject to regulator approval to ensure that it doesnt create an uncompetitive environment in the UK Airline business. The biggest issue will be the diposition of the “landing slots” that BMI owns at Heathrow Airport. BMI currently owns about 8-9% of the landing rights, and no doubt that IAG was motivated to get a deal down quickly so that it can access these coveted rights. In the past it had stated that it would share of these slots to maintain fair balance but I suspect they’ll keep most of the rights for themselves.

What hasn’t been determined yet is the fate of BMI’s frequent flyer program, Diamond Club. For now, BMI said that Diamond Club will function as normal and that members will continue to earn miles and will be able to redeem miles. I suspect this will be the least important item to be resolved by both sides and nothing may happen for months. So for those of you who are Diamond Club members, hopefully your status will not expire until April, which gives IAG and Lufthansa time to figure out the details for the program’s future before your status expires. For Diamond Club members, their ability to earn and redeem miles is critical, and knowing whether their program will be absorbed by Lufthansa or be part of the package sold to IAG is an important item to resolve.

Click here for the link to the BBC story as reported this morning. I’ll post more details as they become available.

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