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British Airways owner IAG weighs takeover offer for Norwegian Air

13 April 2018

British Airways parent company International Airlines Group (IAG) is considering buying budget air carrier Norwegian Air Shuttle, in which it recently acquired a 4.6% stake, to increase its presence in the low-priced market.

As a result, the stock price of Norwegian surged to over 40 percent on Thursday, after a rough year of decline following stockholders concerns about the profitability, the level of debt and expansion rate of the carrier.

IAG was formed from a merger of BA and Iberia, the Spanish flag carrier, in 2011 and has already grown over the past three years following a number of buy-outs. With LEVEL's launch IAG now has five main airline brands, including Aer Lingus, British Airways, Iberia and Vueling.

A move for Norwegian underlines...

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Norwegian shares took off on the Oslo Stock Exchange after the announcement, rising 20.8%.

Norwegian is one of the few low-priced airlines to venture into long-haul flights, which has always been the preserve of major carriers, and has been rapidly adding flights. Norwegian offers 17 weekly frequencies (34 flights, 17 per direction), between Barcelona and US destinations of Los Angeles, San Francisco, New York and Miami, while Level maintains routes from El prat to San Francisco, Buenos Aires, Punta Cana and Boston.

Highlighting the hard state of Norwegian's finances, the airline last month raised $168 million in a share sale after warning of a larger than expected first-quarter loss.

Norwegian released a brief statement in which the airline confirms the acquisition of 4.6 percent and affirms that it had "no prior knowledge" of the transaction.

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Whether it proceeds with an offer for Norwegian or not, through its new investment, IAG will at least be well-placed to influence its rival.

Also, the carrier states that "Norwegian has not been in any discussions or dialogue of IAG about the matter".

"If there is no imminent bid for Norwegian, IAG is just the first vulture to have landed that would like a say in how Norwegian's long-distance dismantled and sold", Norne analyst Karl Johan Molnes said.

The buy-up caught Norwegian by surprise.

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Norwegian Air carries over 30 million passengers a year and last year struck an agreement so easyJet customers could access its long-haul routes.

British Airways owner IAG weighs takeover offer for Norwegian Air