What is Lufthansa planning to do with bmi, the former British Midland? Last year, the German flag carrier agreed to buy a 50 per cent stake from Sir Michael Bishop to take its holding to 80 per cent. Assuming that European competition regulators do not object, the deal should be completed in a month or so. What then?

Lufthansa will gain 12 per cent of Heathrow's valuable slots, but it will also take over an airline rumoured to be suffering badly. One option would be for Lufthansa to convert some of bmi's slots from short-haul to long-haul.

But bmi has not really caught on as a long-haul brand and it may find it hard to compete with BA and Virgin on transatlantic routes. Lufthansa could use its own name on long-haul flights out of Heathrow, but its brand may also struggle in the British market.

Virgin has been proposing a tie-up with Lufthansa because it wants access to a European feeder network. Lufthansa could take advantage of Virgin's brand on long-haul routes. Alternatively, Lufthansa might just break up bmi and sell the slots to the highest bidder, although there is not much money around these days. The likelihood is that Lufthansa will focus on integrating bmi and turning it around before accepting the advances of Virgin or any other potential partner.

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