Lufthansa said on Friday that it planned to exercise its future option to take over majority control of BMI British Midland, the UK airline controlled by Sir Michael Bishop, FT reported.
The move will accelerate the process of consolidation in the European airline industry, which is being led by Lufthansa and Air France-KLM, and will give the German carrier a strategic bridgehead at London Heathrow, Europe's busiest airport.
The statement made by Stephan Gemkow, Lufthansa chief financial officer, caused consternation at BMI, where Sir Michael had insisted in a speech only on Thursday that the BMI shareholders would not be "bounced" by other airlines or the media into a decision on future ownership.
Lufthansa already holds a stake of 30 per cent minus one share in BMI alongside SAS Scandinavian Airlines which holds 20 per cent. Majority control is held by Sir Michael, the 66-year-old BMI chairman, with a stake of 50 per cent plus one share.
A structure of put and call options between Sir Michael and Lufthansa has existed since the German airline took its initial stake eight years ago. Sir Michael holds a put option running from December 2005 to June 2009 to force Lufthansa to take majority ownership, while Lufthansa holds a call option running from December 20 2008 to June 19 2009 to take over Sir Michael's stake.
Mr Gemkow told a press conference on Friday: "We are determined to exercise the option to take over the majority stake of BMI chief Sir Michael Bishop. There are no negotiations on the issue, as these are not necessary.
"The Lufthansa group has options that allow us to take over the majority of BMI in the foreseeable future."
The public declaration by Mr Gemkow was refuted by BMI, where a spokesman for the UK airline said: "I can confirm that no decision has been taken by either Lufthansa or BMI about the outcome of the put and call options of the two companies."
The future ownership of BMI has been at the centre of increasing speculation because of the timing of the put and call options and the airline's key holding of about 11 per cent of the take-off and landing slots at Heathrow.
Both British Airways and Virgin Atlantic, which is controlled by Sir Richard Branson, have made clear that they would also be keen to gain control of BMI if the opportunity were to arise.
Willie Walsh, BA chief executive, said last month: "We are very interested in the future of BMI."
Virgin Atlantic, which previously held unsuccessful talks with BMI, has said it would fiercely oppose any BA move to acquire BMI.
The value of the BMI slot holding at Heathrow has been underlined by the record prices paid by US airlines to acquire take-off and landing slots, led by Continental Airlines, which paid $209m (?106m) for four pairs of slots.
Lufthansa on Friday reported record first-quarter operating profits of €188m (?150m), up from €36m a year ago, helped by the first-time inclusion of Swiss International Air Lines, the carrier whose takeover was completed in March.