BMI to fly budget carrier

January 10, 2002 Posted: 1225 GMT

LONDON (CNN) -- BMI British Midland, the UK's third biggest airline, plans to launch a non-frills carrier to win back passengers from European budget airlines.

Ryanair, Europe's biggest non-frills airline, Easyjet and Go have won more passengers by slashing fares, while traditional full-service carriers struggle in the wake of an economic slowdown and September's terror attacks.

Two European airlines, Swissair and Belgium's Sabena, have gone out of business since September 11, while Europe's biggest airline British Airways (BAY) is undertaking a review of its loss-making European operations.

That review could lead to hundred's of job losses and the closure of some European routes as BA, which sold its low-cost carrier Go to venture capital fund 3i Group, focuses on it lucrative transatlantic routes.

BMI said the new airline would be based at East Midlands Airport in central England and offer high frequency services to Barcelona, Nice, Palma, Malaga and Alicante, starting on March 23.

The move is in response to Go's decision to start services from the airport in May.

"BMI is launching the this new airline in response to clear market opportunity and consumer demand," said BMI's director responsible for the new airline Nigel Turner.

"With the launch of this new airline, BMI will have a strong presence in both the no frills and full service airline sector."

The new airline will have a separate name and identity from BMI British Midland. BMI is part of the Star Alliance, which is headed by United Airlines and Germany's Lufthansa.

BMI has cut jobs and flights on its long-haul routes because of falling demand for air travel.