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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.

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.

International Airlines Group to buy Norwegian Air

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 (99)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Lev441 says:

    WOAH

    • Chris Palmer says:

      Very bad news for competition if this goes ahead. BA must have realised they were going to lose in the long run to Norwegian attacking their profitable transatlantic routes.

  • Optimus Prime says:

    Had to check the calendar. I thought it was 1st April.

  • N says:

    1. Drive down the product to compete with Norwegian
    2. Buy Norwegian
    3. ???
    4. Profit

    • ed says:

      3 = improve customer experience – densification and M&S food options

  • Paul says:

    “BREAKING: IAG confirms it is in talks with Norwegian to acquire the airline”

    Then the statement reads:

    “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.”

    So what one is it?

    • N says:

      I guess the reports stem from this bit of the statement;

      “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.”

    • Daftboy says:

      That’s standard language used in statements like this – the trigger for having to disclose is relatively low, so includes situations like this where they are actively considering an acquisition but haven’t necessarily done anything further, like formally engage with the target.

  • Andrew H says:

    So if IAG do buy Norwegian, what will they do with it? What does Rob mean by ‘snuff it out’?

    • Anna says:

      Presumably to wind it down so that it doesn’t compete with BA. Are there not laws against this kind of thing?

      • Rob says:

        Move the long haul aircraft somewhere else in Europe.

        • Rupert says:

          Seems obvious – merge it with Level and consolidate those down to one airline brand – no doubt will be Norwegian that stays as it’s well known..

        • Andrew says:

          I’ve never been convinced by the ‘Norwegian’ brand. Does it really work outside of Scandinavia? British Airways flights go (with some very limited exceptions) to or from Britain. Likewise for Air France or Swiss. If you wanted to fly from London to New York would you think of searching on an airline called Norwegian? Some people must see those flights and discount them since they assume it means travelling via Oslo? The non-Scandianvian routes could easily be rebranded.

        • Gavin says:

          Most people search using skyscanner / google flights etc – not on the individual airlines website

        • Mark says:

          The Norwegian brand is quite well known these days in the UK, enough that they have BA running scared trying to disrupt their operations through what must be substantially loss making directly competing flights. As Gavin says many people use comparison sites these days, which generally clearly identify any stops involved.

      • Anthony Dunn says:

        Would this not be a prima facie example of a need for a Competition and Markets Authority referral? I cannot think of a clearer example of an attempt to eliminate competition and shore-up an oligopoly/qua-monopoly.

        It’s about time that the CMA started to show its teeth.

        • Rob says:

          No, because air travel is looked at on a route by route basis and won’t change much. Such investigations also tend to see transfer flights as equal to direct flights, so even if BA had 100% of one route it would still be seen as facing competition from other hubs.

          Virgin won’t cause trouble because any CMA investigation is also likely to touch on the VS / Air France / KLM JV.

          Even if IAG had to give up all of the Norwegian slots at Gatwick, they are unlikely to go to budget long haul carriers so BA still wins.

      • Nick says:

        What laws would there be? It’s perfectly allowed, and happens all the time. Many start-ups expressly intend to be bought out later.
        In this case, anti-competition laws *should* limit the effect at Gatwick and Madrid. However, aviation competition authorities are incredibly weak and I doubt they’ll do much, and in any case the removal of Norwegian at Gatwick is exactly what BA wants!! We just have to hope that Norwegian shareholders consider themselves better than IAG. But given what they played with Lingus, that’s unlikely in the end. Sad times.

  • Johnny5a says:

    Would this be subject to any competition commissions? This is bad news.

    • Rob says:

      Only in terms of the Gatwick slots. There won’t be any specific route issues in the UK.

      • meta says:

        But potentially it would be subject in other EU countries. I doubt this would go through EU regulators easily (and bear in mind that Norway does fall under EU regulations too!). We are not talking about acquiring UK airline!

        • Rob says:

          IAG has no assets in France, Germany, Netherlands, etc etc. There may be an issue in Spain and Ireland but that is it.

  • sunguy says:

    Actually, this could be quite good…..

    What BA need is to up their standards on British Airways …. Ive often said they should never have got rid of GO…..

    However, this could be quite bad – it would depend on how they run the Exec club alongside it…and the routes they run with it…..

    We could find some of the busiest tourist routes being replaced with Norwegian services – with either no TP/Avios significantly reduced (maybe 5TP each flight rather than distance based?). E.g. instead of say 10 flights a day to NY, reduced to 3 BA flights and 7 Norwegian with the BA flights being stupidly expensive in comparison.

    • sunguy says:

      Basically, we all bemoan IAG (including me) for completely ruining a premium airline – maybe they will create BA as a properly premium airline and run a penny pincher to do the daily grind.

  • Adrian says:

    Many congratulations on being first with this important story!

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