AIRLINE BMI British Midland is to reduce staff numbers by up to 1,500 as part of a £100m cost-cutting drive.

The cutbacks - equivalent to about a third of the airline's workforce - are expected during the next three years.

BMI, which operates a fleet of 41 aircraft, said it would achieve the reduction through staff turnover and had no intention of axing jobs.

The cost-cutting exercise comes after BMI - controlled by founder and chairman Sir Michael Bishop - made a loss of £19.6m last year following profits of £12.4m in 2001.

Many of the jobs will be lost on the ground as the airline simplifies its business practices and encourages passengers to use automatic check-in facilities.

Project Blue Sky will also see BMI switch to an all-Airbus fleet. Austin Reid, chief executive, said: "We are anticipating head count reductions through improved and simplified business processes, but we expect these to be accomplished through natural attrition over the three to four year timescale of the project."

The overhaul comes less than a month after it emerged BMI - based at Castle Donnington, Derbyshire - had discussed a range of "co-operation" issues with Sir Richard Branson's Virgin Atlantic.

That led to speculation the pair had also discussed the possibility of a merger.

BMI expects to reduce staff numbers by about 450 to 500 a year, with the aim of making annual savings of £100m by 2005.

The airline said that services would be unaffected by the changes.