Virgin Atlantic confirmed Monday it is still interested in British Midland Airways, or bmi, President Richard Branson said following a Deutsche Lufthansa AG (LHA.XE) agreement with bmi.

German airline Lufthansa said Monday it had reached an agreement with Micheal Bishop, the cofounder of the bmi, to buy the airline in stages, finally ending a dispute that has lasted for months.

The initial stage will see Lufthansa, which already owns 30% less one share of bmi, taking an indirect 80% stake in its loss-making U.K.-based peer. It will then aim to buy the rest of the airline, once it has made sure it wouldn't be violating U.K. airline ownership rules.

Lufthansa and Bishop have been in talks since last October, when bmi's founder exercised a put option that allowed him to force Lufthansa to buy his stake of 50% plus one share. The option, which also involved Scandinavian carrier SAS AB (SAS.SK), had been in place since 1999. Under the deal, Lufthansa could also have exercised an option forcing the sale of Bishop's stake.

The two sides have disagreed on the sale price and on the terms of the option since Bishop exercised his right, but they have now reached an out-of-court settlement.

-By Kaveri Niththyananthan, Dow Jones Newswires; kaveri.niththyananthan@dowjones.com

(Jan Hromadko contributed to this story)