BMI, formerly British Midland, the second-biggest British airline, said yesterday that it would file a formal complaint with the European Union this week alleging a lack of competition at London Heathrow airport.

Bmi said the Bermuda II agreement, which restricts services from Heathrow to the United States to just four airlines - British Airways (BA), Virgin Atlantic, American Airlines (AA) and United Airlines - was breaking EU competition law.

The agreement was signed by Britain and the United States in 1977.

BA and AA recently announced they were resurrecting plans to form a new transatlantic partnership, three years after they dropped a previous bid because of demands from competition authorities that they give up precious take-off and landing rights at Heathrow.

But Bmi said that although British Airways and American Airlines had applied for anti-trust immunity, the application did not guarantee that the Bermuda II agreement would be revoked by the two governments.

"It is extremely regrettable that we have to resort to taking this course of action," said the chairman of Bmi, Sir Michael Bishop in a statement.

"We believe that the agreement flouts EU competition law as it clearly prevents free competition."

Bmi, which is 20-per cent owned by German carrier Lufthansa, joined the Star Alliance headed by Lufthansa and United Airlines last year.