WHEN Sir Michael Bishop, the veteran airline entrepreneur behind BMI British Midland, flew to Frankfurt 10 days ago to see his opposite number at Lufthansa, fireworks could have been expected. Just two days before his arrival, Bishop had taken the German airline to the High Court in London to settle a nasty dispute over whether Lufthansa would honour a decade-old agreement to buy BMI.

In the end, common sense prevailed. Lufthansa, which had been trying to force Bishop to inject money into BMI, agreed to the takeover. Bishop agreed to a reduction in price, from £292m to £223m. The legal proceedings were dropped.

“I had to explain to them the English expression – doing a deal at the courtroom doors,” Bishop said. The Germans move in at Donington Hall, BMI’s East Midlands headquarters, on Wednesday.

It was a fittingly dramatic denouement to Bishop’s 45-year-stint at the top of BMI, a deal that alters the competitive landscape among UK airlines at a stroke by making Lufthansa the second-largest carrier at Heathrow – unless it decides not to take on the challenge and sell BMI.

Bishop, 67, has been present at all the big moments in British commercial aviation over the past four decades, and the prime mover in many. The names the public normally associate with the airline business – swashbucklers such as Sir Richard Branson, Michael O’Leary and Sir Stelios HajiIoannou – all owe a debt to Bishop, a quietly spoken businessman who eschews the glitz and glamour that has become normal for airline tycoons.

It was Bishop who first took on the dominance of British Airways, fighting to be allowed on to UK domestic trunk routes – London to Glasgow and Edinburgh. In the 1970s, statute allowed British Airways to block any service by a rival in which it might conceivably have a commercial interest.

“People can’t comprehend it now. It’s a bit like telling children there was once a world without mobile phones,” Bishop said. He went on to help force through European deregulation, which paved the way for a new wave of budget airlines such as Easyjet and Ryanair, and pushed for open skies across the Atlantic.

The fight for domestic deregulation brought him into politics for the first time. He pushed the incoming Thatcher administration to take an interest in aviation reform, a campaign that culminated in a letter to Margaret Thatcher in the week before Easter in 1982. “It was the Wednesday before Good Friday, the day on which the Falklands were invaded. Parliament was recalled on Saturday to discuss the crisis – but I had a reply from her the following Wednesday. That made me think she really was a remarkable individual.”

Bishop was later regarded as one of Thatcher’s favourite businessmen, although he rejects suggestions that he was very close to the Conservatives. The plane John Major used on his campaign trail was from BMI, but “chartered at a commercial rate”. Bishop was appointed chairman of Channel 4, the broadcaster, and still regards his thwarting of its planned privatisation by the Tories as one of his proudest achievements.

BMI built up a significant presence at Heathrow, second only to British Airways. By the end of the 1990s, with Easyjet and Ryanair starting to make inroads into European traffic, Bishop realised the position at the airport was the airline’s future fortune. He went looking for partners that wanted in to London, and found Lufthansa.

“I knew that the whole value of BMI was to develop its position at Heathrow. I have spent the past nine years ensuring that business could be passed seamlessly to a significant international operator,” he said.

Bishop struck a deal with Jürgen Weber, then the German company’s chief executive, that gave it a minority stake in BMI, and an agreement that it would pick up any losses sustained on BMI’s European operations.

Bishop and Weber also agreed a contract that would lead to last week’s court case – a “put” and “call” option that gave Bishop the right to sell his controlling stake in BMI to Lufthansa at an agreed price. Lufthansa had the right to buy it at the same rate. The option, however, did not kick in for a decade.

Weber probably thought he had got a great deal. It was the early days of competition between big airline alliances and the Lufthansa-led Star Alliance was itching to get at British Airways, founder of the rival One World grouping.

What better way than to set up a sizeable operation at its home base, at a price set 10 years earlier?

Even after the deal was done, Branson was eager to unite Virgin with BMI, creating a British champion. Talks were held several times, but to no avail.

Was it simply a matter of price? “I wouldn’t say we ever really got as far as price,” said Bishop. He added that he had nothing against the idea of an all-British combination, but it is clear he felt it wouldn’t really be big enough. “We wanted a partner that had a large network,” he said.

Bishop said he does not dislike Branson, despite a widespread belief in the aviation industry to the contrary. “It’s completely untrue. I like Richard, but of course we are in a competitive industry. I’m not like some of my counterparts in that I can slag off my competitors in public – I’m not any good at it, and nor do I think it’s particularly reputation-enhancing.”

By the end of last year, with the recession hitting aviation hard and BMI’s losses mounting, Lufthansa’s deal wasn’t looking so good after all. Bishop exercised his option, but the Germans cut up rough, with The Sunday Times revealing that the deal had turned sour. Lufthansa demanded BMI be recapitalised before they went ahead. Bishop took them to court, and finally settled in Frankfurt last week.

He will say nothing about what may happen to his creation. “It is being delivered to new owners, and I don’t want to say anything about what their plans might be. They have all the options open to them and I don’t want to second-guess what they are going to do.” Airline industry experts think a break-up is likely, with Lufthansa keeping the Heathrow slots it wants and selling the rest. Another option would be that long-mooted deal with Branson.

As for Bishop, he will devote more time to his charitable interests – he has a charitable trust, the Michael Bishop Foundation, is a big fundraiser for the Royal Flying Doctor Service of Australia, and is a long-term supporter of the D’Oyly Carte Opera. He has turned down a number of invitations to become a nonexecutive director– he gave them all up when he turned 60, saying the balance between risk and reward was no longer attractive.

He won’t rule out a return to the airline industry, but said he had no immediate plans. “As I told a Lufthansa function at Christmas, one reason to get out of the airline industry is to make some money.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive