German airline Lufthansa today strengthened its position at the UK's biggest airport by taking control of Britain's second-biggest airline.

Lufthansa announced it was adding to its 30% stake of bmi (formerly British Midland) by buying bmi chairman Sir Michael Bishop's 50% stake in the airline for around £318 million.

With an 80% share, Lufthansa will take over bmi and become the second-biggest carrier at Heathrow behind British Airways.

Another major Heathrow carrier - Sir Richard Branson's airline Virgin Atlantic - immediately increased speculation about the shape of things to come at Heathrow by suggesting that Lufthansa and Virgin combine their short-haul and long-haul networks.

Virgin and BA also both paid tribute to Sir Michael who built British Midland up in the 1960s and who is one of the best-respected and best-liked figures in UK aviation history.

Lufthansa said today that it hoped the deal with bmi, which includes the carrier's low-fare operation bmibaby and bmi regional services, will be concluded within the next three months.

The remaining 20% of bmi is in the hand of Scandinavian carrier SAS. It is not known yet whether Lufthansa will acquire this stake.

Lufthansa now becomes an even bigger figure at Heathrow where BA is attempting to form an alliance with American Airlines in a move bitterly opposed by Virgin Atlantic.

Steve Ridgway, chief executive of Virgin Atlantic, said today: "Michael Bishop is one of the icons of UK aviation. He has been a considerable force in championing the cause of the consumer and, along with Virgin Atlantic, has helped to provide much-needed competition to BA, and choice for consumers.

"Now we are about to enter the next phase of bmi's future and a turning point in aviation. Everyone has speculated that it would make sense for Virgin Atlantic and bmi to combine their long-haul and short-haul networks.

"There is now a major opportunity to do that and create a new and even more effective competitor to BA. I am sure that Lufthansa realise the future opportunities and this could be a really good example of the right industry consolidation.

"It would be good for consumers, for UK plc and European aviation's competitiveness."

Bmi can trace its origins back to 1938, although the airline name British Midland did not start until 1964, becoming bmi British Midland in 2001 and later just bmi.

Last year the airline carried 10.6 million passengers and currently flies to 51 destinations using a fleet of 51 planes.

This compares with Lufthansa statistics that show the German carried flew 83.1 million passengers last year and currently operates to 209 destinations with a fleet of 276 planes.

Bmi has 4,300 employees and last year had a turnover of £1,023 million.

British Midland's darkest hour was in January 1989 when one of the airline's Boeing 737s crashed on an embankment on the M1 in Leicestershire just short of East Midlands airport as the cockpit crew were trying to land after an engine caught fire.

A total of 47 people were killed but some of 117 passengers aboard escaped with only minor injuries and, almost miraculously, there were no casualties on the ground.

Sir Michael won high praise for his handling of the disaster, driving straight to the scene and keeping everyone informed of what was happening.

BA chief executive Willie Walsh said today: "Sir Michael Bishop has done a great job for British aviation and is highly respected for all that he has achieved.

"We hope that he will continue to play a key role in the industry."