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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.

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 (99)

  • paul says:

    Really bad news for consumers and I hope that regulators step in block this deal. BA offers appalling service and standards even now and the only hope was that Norwegian and its like would force change. IAG clearly worried about them so best way to deal with competition is to stop it.

    Needs to be halted

    • Callum says:

      I’m confused why you think Norwegian would force BA to improve their service?

      If anything, surely they’re responsible for the opposite – proving most people don’t care about the frills coveted on here.

      This is definitely terrible for competition though – I hope it doesn’t go ahead.

      • Rich says:

        BA’s recent improvement to WT catering had nothing to do with a desire to add cost and everything to do with competition, that’s my view anyway. And it’s the same with hand baggage only fares.

      • RussellH says:

        Indeed. I would have thought that the blame for the deterioration in BA’s standards long haul is almost entirely down to penny penching purely to try to match Norwegian on price. If IAG takes over Norwegian, then they potentially have a foot in both the low cost and the traditional markets, and they could then, potentially, upgrade their traditional offering under the BA / Iberia flag, while also serving the lowest-price-whatever the conditions under the Norwegian name.

  • Richard says:

    Any sensible look at Norwegian’s financial reports showed they are an airline on borrowed time anyway; only question whether the shareholders are too proud to sell out to IAG before the balance sheet collapses. Any real movement upwards in the price of oil or hint of recession and the game will be up anyway.
    Good move from IAG to give themselves a headstart on picking up the pieces.
    EX OSL fares have got maybe 18 months left of being as they are. Enjoy them while they last folks

  • Nick says:

    So IAG’s obvious strategy is to buy out anyone who’s becoming a threat, in order to remove competition and keep fares high(er) – they did it with Lingus, and now they’re trying Norwegian. So who’s likely to be next? Any guesses?

  • Colin MacKinnon says:

    With supermarkets, the old boys look to online shopping, home delivery, click and collect, loyalty cards, big superstores and local shops etc. Aldi and Lidl don’t! Guess who is growing!
    In airlines, the old ones have old staff on higher pay, pension liabilities, fuel inefficient aircraft, tatty interiors and luxury classes.
    New ones like Norwegian have a premier class – as does Thomas Cook etc- but not fancy stuff, like loyalty programmes and buy your own luggage food seat reservations pension liabilities etc.
    Only puzzle is why they are not making money! So why copy/buy them?

    • RussellH says:

      They do not make money because they have a huge fleet of new planes to finance, while charging fares that do not cover their costs. No idea about their employment practicies, but with any seriuos cut-price offering, there is always the risk that worker’s Ts+Cs are poor too.

      There are exceptions to this, but not many.

    • Tony says:

      Norwegian have a loyalty programme.

      • Lady London says:

        @Tom are you treating that credit as some very skilled people on here do…..spend it sooner than later in case of upcoming changes?

  • Maxine Chivers says:

    We flew on Norwegian from Singapore to London Gatwick. I love low cost airlines to have long haul flights like that. I am very worried about this news discussed here because I am going on a trip in April 2019 and I am just about to buy three flights on Norwegian Air. I need London Gatwick to Oslo, Oslo to Bangkok and Oakland to London Gatwick. I have already bought three flights on Air Asia.

  • flyforfun says:

    We flew Norwegian Gatwick to Bergen, Kirkness to Oslo and then BA Oslo to Heathrow a few months ago.

    Norwegian was really relaxed and pleasant flights. BA had a very stressful start with boarding being a manic rush of Club, then status holders leaving only about a dozen of us waiting to board. Luckily we had a spare seat next to us down the back end of the plane (tactical choice!). Probably not helped that it was the last flight of the day on a Thursday when a lot of workers would be going back. The Norwegian flight that left 30 mins before seemed equally packed but with less business people on board.

    The Wifi on Norwegian was a big plus and I dare say the service from the crew seemed a bit friendlier too. I’d be sad to see them merged into BA and lose their identity.

  • sam wardill says:

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

  • Rivo says:

    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.

    • Will says:

      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.

    • Tony says:

      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.