Virgin Atlantic in talks over bmi

LONDON (Reuters) - Virgin Atlantic, which is interested in buying bmi, said it is in talks with the airline's majority owner, Germany's Lufthansa about the future of the airline.

The news on Wednesday adds another thread to the industry's current wave of merger mania, coming a week after British Airways and Australia's Qantas Airways said they were in merger talks to create the world's biggest airline in an industry desperate to cut costs in the global downturn.

"These discussions may or may not lead to an agreement and a further announcement will be made in due course," Virgin Atlantic said in a statement.

Its chief executive, Steve Ridgway, told Reuters in October a tie up with bmi would be a "very compelling opportunity" that would make his airline a stronger competitor to Heathrow kingpin British Airways.

Virgin believes its long-haul operations would sit well with bmi's predominantly short-haul business.

Virgin is particularly interested in bmi's slots at Heathrow which at 12 percent is more than Virgin's 3 percent share but much less than BA which has over 40 percent.

In October, bmi founder Michael Bishop exercised an option for Lufthansa to take control of bmi by raising its stake to about 80 percent by buying 50 percent plus one share in bmi from Bishop.

Lufthansa Chief Financial Officer Stephan Gemkow told Reuters in November that it would consider selling bmi's low-cost carrier bmibaby, although Chief Executive Wolfgang Mayrhuber has said it is not actively looking to sell bmi assets.

Elsewhere in Europe, Irish budget carrier Ryanair has made a hostile offer for compatriot Aer Lingus AERL.I>, and is looking to woo regulators and investors.

(Reporting by Dan Lalor; editing by Elaine Hardcastle)