On the sale of British United Airways to Caledonian, British United Island Airways was retained and renamed British Island Airways (BIA). During the 1970s the varied aviation and travel interests of British & Commonwealth, which by now included hotels and travel operations, were in many cases generating far from happy trading performances. There were clear exceptions such as Servisair and Bristow Helicopters, the latter proving to be a hugely successful investment for the group.
In 1980 BIA was merged with rival Air Anglia to form Air UK. At the time of its formation Air UK was the largest regional airline in the United Kingdom and the third-largest scheduled carrier. It served virtually all regions of the country with links to the continent.
The early 1980s saw a reduction in losses followed by modest profits and plans for expansion. 1982 saw the launch, with Midland Airways, of Manx Airlines. In general, however returns were disappointing and an arrangement with the Dutch flag carrier KLM ensured that profit or losses were shared so long as Air UK maintained a feeder service to Amsterdam.
In 1987 KLM acquired a minority stake in Air UK’s holding company, increasing this to 45% in 1995. British & Commonwealth’s stake in British Air Transport (Holdings) was acquired in 1997 with Air UK rebranded as KLM uk the following year. In 2002 the integration of KLM uk into Dutch-based subsidiary KLM Cityhopper constituted the final link in a chain of events which had begun with the diversification of British & Commonwealth into civil aviation.