An intensely interesting situation has arisen in Europe after Lufthansa assumed outright control of UK carrier bmi after chairman Sir Michael Bishop exercised a £318 million option to sell them his stake, lifting the German carrier’s equity to 80%.

Sir Richard Branson, who shares Virgin Atlantic 51:49 with the less than thrilled owners of Singapore Airlines, has always wanted to acquire or merge with bmi some way or the other, and not just to end the grammatical atrocity of a name written in lower case.

Indeed SRB has been seen visiting SMB at his Rushcutter’s Bay southern hemisphere residence in Sydney on past occasions.

But today he has triggered pages of speculation in the European media over suggestions that Virgin Atlantic would really like to do a deal with Lufthansa to perhaps merge its network with bmi’s and then combine that with an alliance with Lufthansa to deal somewhat comprehensively with the outright domination of slot access at London’s Heathrow airport by arch rival British Airways, which is trying for the umpteenth time to merge with American Airlines, and possibly even Iberia, the Spanish flag carrier.

This is a lot of balls suddenly in the air in relation to possible airline consolidation, including metaphorically both of Richard’s.

How they come down is anyone’s guess. The general approach of Lufthansa to mergers and acquisitions seems to resemble that of Roman Centurions encountering a village that wasn’t on their maps before, or after, their arrival. There is the Lufthansa way of doing things, or oblivion.

This has been tempered a little by the Lufthansa investment earlier this year in US low cost carrier JetBlue. US law prohibits foreign owners from exercising control over airlines they invest in. Which Branson knows full well, owning 25% of Virgin America, which is seeking another $US 100 million or so to keep going.

Lufthansa and the Air France KLM merged entity are currently the dominant forces behind airline consolidation in Europe, and both camps remain bullish about their interest in suitable investments elsewhere in the world, starting with China.

The German carrier might just ignore Branson and get on with extracting the maximum benefit it can from bmi, adding it the struggling investment in SAS Scandinavian, a new investment in Brussels Airlines (which emerged from the short lived Virgin Express venture) and current plans to buy into Austrian Airlines, and set up a new division in Italy because Alitalia isn’t worth buying, and expand its more recent acquisition Swiss Airlines.

But if a deal was imposed, fascinating possibilities emerge in the Asia Pacific. Branson last featured on the Virgin Blue registry with more than 25% of its stock, and owns 20% of AirAsia X, the long haul division of AirAsia which is by far the most successful trans border low cost franchise in the hemisphere, and light years ahead of imitators Tiger and Jetstar.

So in summary, a deal between Lufthansa and Virgin Atlantic or Branson as its major owner might lead to other involvements with the Virgin Blue group (including Pacific Blue, V Australia and Polynesian Blue), with the AirAsia franchises in Malaysia, Indonesia and Thailand, with synergies between Virgin America and JetBlue, and of course create a huge network across the North Atlantic and within the UK and the continent.

Given that most airline mergers have choked before or after birth, these possibilities might never fully eventuate. But they will be looked at with more than passing interest by the owners and managers of Qantas, Singapore Airlines, Virgin Blue and everyone one of their major competitors.

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