BMI transfers East Midlands flights to no-frills unit

BMI British Midland is to start operating all its scheduled services from East Midlands airport under the banner of its new no-frills carrier bmibaby.

But Sir Michael Bishop, the chairman of BMI, denied that the move was a prelude to turning the entire airline into a low-cost carrier. BMI's main base is Heathrow where it is the second biggest operator of scheduled services.

He said the decision to transfer all BMI's routes at East Midlands to bmibaby had been taken because of the airline's rapid growth and the increased competition at the airport from the rival low-cost carrier Go.

Sir Michael also said that the routes served from East Midlands did not need to be operated by a full-service scheduled airline as they did not feed into any of the hubs used by its partners in the Star Alliance.

Currently bmibaby operates nine services from East Midlands. This will increase to 15 from November when the six routes still operated by BMI are transferred across.

The low-cost carrier has also recently decided to start operating from Cardiff where it will begin services to another nine destinations in October.

Austin Reid, BMI's chief executive, said: "A widow of opportunity clearly exists for us to grow and develop the low-cost part of our business at a time when the industry faces considerable competition and lower fares. We have always maintained that we will compete vigorously in a wide range of markets, both the full-service and the low-cost sectors."

BMI recently announced that bmibaby had achieved its passenger targets for the first year of operation in its first three months.

BMI has radically altered its fare structure so that passengers can buy one-way tickets and take advantage of cheap deals without staying a Saturday night. But it has yet to reach agreement with its pilots on the introduction of low-cost operating procedures. The main element of this will be a productivity deal under which its pilots will work more hours and BMI will get greater use out of its aircraft.

Sir Michael said: "We are addressing the costs of the mainline business very vigorously. We are in discussions with our pilots and I am hopeful that we will get lower costs into every part of the business."

Increased competition and the downturn in air travel mean that BMI will make a loss again this year after last year's £12.5m operating loss.