Deutsche Lufthansa AG (LHA.XE) will attempt to come to an agreement with SAS AB (SAS.SK) over the Scandinavian carrier's 20% stake in British Midland Airways, or bmi, in coming weeks a person familiar with the matter said Wednesday.

The person said the German carrier hopes to come to an agreement with SAS on whether it would acquire the stake, how it would do so if Lufthansa takes the stake and what the terms would be.

Lufthansa increased its stake to 80% earlier this year after bmi's founder, Michael Bishop, exercised an option that forced the German carrier to buy his stake of 50% plus one share. It has now been forced to make an offer under law to SAS, which holds the remaining 20% stake.

Lufthansa has received interest from at least a dozen companies over bmi's future but is focused on reducing losses at bmi, which may help the German carrier get a better price for the airline later.

The person said Lufthansa's main priority would be to return the loss making company to profit and then make a decision on options on whether to sell the company. Lufthansa's options include selling bmi, parts of it or even keeping bmi.

A spokesman for Lufthansa said its priority is to restructure bmi "together with bmi's management" and that could run parallel to assessing its options over bmi's future.

U.K. based British Airways PLC (BAY.LN) and Virgin Atlantic have both recently voiced their interest in bmi, mainly for the lucrative slots bmi holds at Heathrow Airport.

Heathrow slots are the most sought after in the industry but don't come on the block often and are expensive. As a result, airlines find it difficult enter or expand in Heathrow Airport.

However, potential bidders may be deterred to bid for bmi as a whole company because of the uncertainty surrounding the current size of its pension deficit and the challenges they would face dealing with those liabilities and unions when trying to cut costs.

A spokesman for bmi declined to reveal the size of bmi's deficit as its accounts have yet to be filed.

The last set of accounts filed show the net pension scheme deficit stood at GBP45.8 million on Dec. 31, 2007.

Company Web site: www.lufthansa.com

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com