Lufthansa is looking at forming an alliance involving bmi and Virgin Atlantic to take on the proposed powerhouse combination of British Airways and American Airlines.

It emerged yesterday that Lufthansa was in talks to buy SAS, the struggling Scandinavian airline, which owns 20 per cent of bmi. Lufthansa already owns 30 per cent of bmi, minus one share, and has an option to take full control of the airline this autumn. Shares in SAS were suspended yesterday after climbing 11.2 per cent following reports that it was in talks with Lufthansa.

SAS, which also owns Spanair, said: “SAS confirms that it is in the process of evaluating various structural possibilities for the group. Within this process SAS is conducting talks about a possible structural solution.”

Virgin has made no secret of its ambition to own bmi.

Lufthansa's move is part of an aggressive push by the airline to become Europe's biggest carrier. It is also looking at taking stakes in or ownership of Alitalia; LOT, a Polish carrier, and Austrian Airlines and it plans to take a 45 per cent stake in Brussels Airlines.

Speculation of consolidation among under-pressure European airlines came as Sir Richard Branson kicked off a £3 million campaign against an alliance between BA and AA. A spokesman for Virgin Atlantic said that the airline was not against consolidation per se and it understood it could become engaged in it in the months to come. “But it is the scale of this alliance between BA and AA that matters,” the Virgin spokesman said. “Even if there were an alliance between Lufthansa, bmi and Virgin, we would still only have 17.5 per cent of slots at Heathrow compared with 47 per cent controlled by BA, AA and Iberia.”

It emerged yesterday that BA was looking to cut its wage bill by £170 million by cutting 1,400 mostly middle management roles.

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