IAG confirms it will open talks with Norwegian to buy the airline

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IAG, the parent of British Airways, Iberia and Aer Lingus, made a statement to the Stock Exchange on Thursday to confirm rumours that it intends to open negotiations with Norwegian Air Shuttle to buy the airline.  An initial share purchase has already been made.

Norwegian shares have jumped sharply on the news.

International Airlines Group to buy Norwegian Air

This is obviously a major development.  Norwegian has a brand new fleet and has proved an increasingly strong competitor to IAG in the UK.  LEVEL and Vueling are weak low cost competitors in comparison.

With Norwegian recently launching Singapore and Buenos Aires from the UK, it was likely to prove an increasingly strong competitor to British Airways – so why not buy it and snuff it out, at least from the UK?

With Gatwick getting increasingly slot constrained, this would also give IAG an exceptionally strong grip on that airport following the recent purchase of the Monarch slots.  It is also possible that, for monopoly reasons, a Gatwick slot sale would be required.

There is clearly potential to roll LEVEL and Vueling, which has a bad reputation, into Norwegian.

I would expect British Airways to very quickly close its Oakland and Fort Lauderdale routes if any deal does go through, since they are only operated to annoy Norwegian.  Loads on Oakland are reportedly under 50 passengers on some days.

This is the emergency statement issued by IAG after Bloomberg reported the share purchase:

“International Airlines Group (IAG) notes the recent press speculation that it is considering making an offer for Norwegian Air Shuttle ASA (Norwegian).

IAG considers Norwegian to be an attractive investment and has acquired a 4.61 per cent ownership position in the airline (minority investment). 

The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian.

IAG confirms that no such discussions have taken place to date, that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.

A further announcement will be made if appropriate.”

Norwegian has stated in response that it had no knowledge until this morning that IAG had bought any shares in the company and that it has not had any contact from the airline so far.

It is worth noting that the 72-year CEO, Bjorn Kjos, has a 27% shareholding and it will be virtually impossible for IAG to acquire 50.1% without his consent.  The Norwegian state investment fund has a further 9.9% and may vote tactically.  Whatever happens is likely to take a number of months, but the Aer Lingus acquisition proved that IAG is prepared to play a long game.

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Comments

  1. sam wardill says:

    If the competition authorities allow this they are not doing their job!

  2. Noewegians balance sheet is not strong. They too are finding that cheap transatlantic services are not sustsinable. Walsh must wait for profits warnings and then strike. In the mean time use some of the capital available to make BA more attractive in premium cabins by changing the club seats and training mixed fleet crews in the difference between a glass of champagne and a can of Tizer!!
    How stupid to spend money on arms to destroy a competitor rather than on beating them with your enhanced product.
    Would Walsh recognise quality if it stated him in the face? Probably not…..nor Cruz.

  3. I haven’t flown with Norwegian yet heard fair comments and reviews on the airline. Might have to give it a shot for a long haul route to the US. Might even go for a premium economy seat. What are your experiences on the airline?

    • Anika reviewed Premium to Boston if you do a search. Miles ahead of BA / Virgin PE.

      • Seconded. The 787s are lovely, seats spacious and nicely reclining. Good service, lounge access, decent-ish food (for PE).

        Also much much cheaper if you don’t want to stay a Saturday night. And the early morning Gatwick service to NYC is like time travel..you arrive in NYC in time to do almost a full day of work!

  4. BA is not IAG it’s the other way round.

    Plus Norwegian have been operating on a similar basis to the ME airlines. Run a loss leader to gain market share. Once that’s achieved prices will start to rise. All those North Sea oil revenues have created one of the largest sovereign wealth funds on the planet. Those shiney planes and WiFi are funding that but it won’t last forever.

    Wasn’t is Branson who said if you want to be a Millionaire, start with a billion dollars and launch a new airline.

    • I’m pretty sure it wasn’t Branson but someone like Lauda possibly? Branson hasn’t really learned that message has he?

      If the sovereign wealth point applies to Norwegian then of course the same logic will apply to Qatar? And the other ME airlines. As we’re already seeing.

    • It is how all the LC airlines operate.
      Look no further than Ryanair. Once market captured and competition destroyed prices go sky high.

      • Aeronaut says:

        Er sorry but Ryanair prices are not sky high! They continue to offer oodles of very cheap fares.

        • Lady London says:

          Hah! Ryanair and Easyjet both have some routes that seem to be priced skyhigh big chunks of the time. These seem to be business direct routes where competition is not providing flights needed. I’ve even booked Lufthansa on a couple of these as miles lounges and hopefully better rerouting options in case of irregular ops on the day, seemed better than the LCC for same kind of price.

      • Doug M says:

        This being the Internet we don’t let the facts get in the way.

  5. No! Awful news. The last thing Norwegian needs is to be taken over by the cretins ergo run BA.

    Very sad ????

  6. This is really depressing. As soon as a low-frills alternative (which is essentially what BA is in cattle anyway) comes to the market with interesting planes & pricing models, BA have to wave the cash to ensure life is boring & as uncompetitive as possible again from LHR & LGW.

    I’ve not flown Norwegian but they offer something new to that market and choice.

  7. Howard says:

    Apart from their problems in the NYC route, Norwegian seem to have been great and, in our experience, really challenged the status quo. BA still haven’t changed their longhaul model to offer properly priced single fares.
    We’ve flown to Denver return with both BA and Norwegian in the last 6 months: BA more expensive on a decrepit 747, Norwegian cheaper in a Dreamliner …. that’s our 3rd transatlantic with Nor. …. they have our vote!!!
    This feels like really bad news, particularly for leisure travellers.

  8. Aharon says:

    Wonder what Virgin Atlantic’s management take on this would be?

  9. chris medler says:

    Hei!
    I fly regularly on Norwegian………

    So much so that the Captain of one flight last year said that I could fly the plane, next time !!!!

    Cheers/skål, Jagmanchris.

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