IAG will not be bidding for Norwegian Air and is selling its shareholding

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IAG, the parent company of British Airways, issued a statement to the Stock Exchange on Thursday morning.

Short and sweet, it says:

UPDATE ON NORWEGIAN AIR SHUTTLE ASA

International Airlines Group (IAG) confirms that it does not intend to make an offer for Norwegian Air Shuttle ASA (Norwegian) and that, in due course, it will be selling its 3.93 per cent shareholding in Norwegian.”

And that’s it.

This was the original announcement back in April 2018:

“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.”

It was believed that IAG followed up on this by submitting a series of bids to buy the entire airline, all of which were rejected by management.  Norwegian stated that other airlines had also expressed an interest.

No deal was ever agreed.  Then, as we wrote in late December, Norwegian announced a series of measures to avoid breaking its banking covenants on 31st December.

Norwegian Air secures new financing for 2019

According to Reuters and Bloomberg at the time:

One Boeing 787 has been refinanced, raising $30m in cash (although of course long-term debt is increased by $30m)

A new cost-saving programme has been launched – no details yet – which is expected to save NOK 2bn in 2019.  This will include closing unprofitable routes.

An “agreement” has been reached with Rolls-Royce over compensation for the Boeing 787 engine issues which have blighted Norwegian’s performance.  However this is paid – either in cash or in kind – it will have an impact from the start of 2019.

Financing has been secured for all aircraft delivered due in H1 2019

Talks are continuing over the sale of some or all of its wholly owned aircraft

None of this was going to help Norwegian in the long term – in fact, by pushing up its long term debt it will make life tougher down the line – but it got it over the next bump in the road.  The hope will be that falling oil prices and the maturing of existing routes will improve revenues in the medium term.

As for IAG …. there was no chance of buying Norwegian without the approval of the 72-year old CEO, Bjorn Kjos, who has a 27% shareholding.  The Norwegian state investment fund has a further 9.9% and may well have voted tactically.

IAG may also have decided that, with its own in-house low cost carrier LEVEL performing well and Norwegian withdrawing from the Gatwick – Singapore route, the threat it posed was containable.  Only time will tell if IAG was right.

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Comments

  1. Ouch – 12 months ago IAG would have bitten Bjorn’s hand off! Looks like this is the beginning of the end.

    • insider says:

      Should have taken the money when he had the chance

    • Except they didn’t, so I don’t really understand where that point comes from…

      Norwegian is a fundamentally strong airline. While they may have expanded too fast, there is no reason why they can’t turn it around and recover, as I’ve been saying to the people predicting its imminent demise for what, five years now?

      • Wouldn’t bet on it, look at the order book which is looking like a major millstone (cancelling an ordered plane is hugely expensive). BA may be flying crappy old planes but they are generally crappy fully depreciated planes! With oil prices down again the benefit of having a new efficient fleet is a lot lower.

  2. And the share price is tumbling even further..

  3. Norwegian were getting slated this morning on Rip Off Britain for their record on delays and reluctance to pay compensation.

  4. Wait for Norwegian to fail and then pick up the assets for pennies?

    • A canny strategy.

      shame that VS are obviously out of cash, as they’d hardly need much of a paint job to take on.

    • Lady London says:

      Exactly. They figured to get rid of a competitor the cheap way. By some market signalling that pulled the rug off the floor under them whilst short term they could have stayed up.

      • You’re claiming that IAGs plan was to make a series of bids which they wanted Norwegian to reject, making people aware of their financial difficulties (because the shareholders would otherwise pay no attention to the state of the airline they’ve invested in?) and thus causing it to collapse so it can pick off the bits it wants (just like every other airline in Europe will be doing)?

        Perhaps it’s me who’s wrong but I don’t think anyone here has any idea how to run a large business/airline or deal with stock market takeovers etc!

  5. Slight clarification (because I am being a pedant): Bjorn Kjos is 72 years old; he’s not been the CEO for 72 years (that would be some feat)

  6. RUBEN MENEZES says:

    OT – have a work trip to Tokyo from LHR and will be flying Doha on Qatar. Flights will be booked on Expedia (can use other sites) for economy class (internal office work trip no business class). I have lots of avios around 100k. Could someone help and explain how I could potentially upgrade using avios? And if so how many avios points I require? Many thanks! Ruben

    • You can’t, I’ve tried. You can only buy entire Qatar tickets with Avios, or upgrade with Qmiles.

    • roberto says:

      Firstly its very difficult to upgrade from economy as most economy fares (except the expensive fare brackets) are non-upgradable. Secondly you need the cabin you want to move into to have availability. Check that first and take it from there.

      Good luck.

    • That’s a nightmare trip. You are pretty much doubling the time you are in the air. I did it once, never again. Why don’t you take de JAL, BA or ANA non stop route? You save so much time…

    • Its a business flight so you need to book a fully flexible ticket – business plans can change at a moments notice . . .
      Once booked, its not so hard to upgrade to Qatar business class for not much cash . . .

  7. OT – Curve metal (amex closed beta) phase two out. Expect emails for invites if you registered interested. I was correct its 14.99 per month

  8. Aeronaut says:

    OT – in fact totally and utterly OT – but HfP readers will be the ones most likely to know…

    Am looking for an online service that will print a message in a greetings card and/or letter (ideally a letter enclosed in a greetings card, with a message also printed in the card) and deliver it to a London address same day.

    Same day delivery of flowers or chocolates is easy to find, but isn’t quite what I’m after! Worth noting I’m not after a regular same-day courier service – as the sender is many miles from London and doesn’t wish to incur that cost, hence the desire for the message to originate electronically.

    Or if the only option is same day deliver of a gift item, a suggestion of something unconventional (i.e. not flowers, chocolates or novichok) would be welcome. It’s really for several people, not just one individual.

    • Do Moonpig offer enough space perhaps for your message? I’ve used them before a few times, you can upload a handwritten version of your name for the card too if you’re not wanting it sent back to you to sign and want it to be more personalised than all just typed. Not sure they’ll be able to do same day though?

    • Dunno about an online service but you could probably get someone on Facebook to do it if you can trust them.

    • Lady London says:

      How many? What budget per delivery? Moonpig used once did not feel personal.

      I would phone my favourite interesting retailer and ask can they help with an item and write up a card for each person and get it delivered if you pay.

      If I was short of time I might ask Fortnum’s. That might not mean I was short of dosh though!

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