The owner of British Airways has agreed to buy Lufthansa's UK unit bmi in a bid to squeeze more growth from its capacity-constrained Heathrow hub and expand services to emerging markets in Asia and Latin America.
IAG, which owns BA and Iberia, says the sale agreement is in principle and a deal is likely to be completed in the first quarter of next year.
BA and Iberia have 45% of Heathrow's landing and take-off slots and bmi has about 9%.
IAG's chief executive Willie Walsh says acquiring the slots is important.
He says he wants to utilise the slots bmi has at Heathrow in a much more efficient way and to expand long-haul flights to connect London to the emerging markets in Asia in particular.
Bmi comprises three underperforming businesses: a carrier serving Europe, the Middle East and Africa; bmi regional, serving the UK; and low-cost unit bmibaby.
Analysts believe the IAG deal, which is for the main carrier and bmibaby, would be worth about $US479 million.