IAG interested in making a bid for Norwegian Air Shuttle

IAG, owner of British Airways, is reportedly interested in making a bid to acquire Norwegian Air Shuttle.

The acquisition would give IAG increased market share in the increasingly competitive low-cost carrier sector.

Norwegian, headed by CEO and largest shareholder Bjørn Kjos, has aggressively launched cheap long-haul flights since 2013, disrupting the European market and forcing bigger airlines such as Air France and British Airways to change elements of their business strategies to adapt to low-cost competition.

However, Norwegian posted a net loss in 2017 as its rapid growth has put pressure on costs. The airline had to raise funds earlier this year to cope with its expansion.

640px-Norwegian_Air_UK_Boeing_787-9_Dreamliner_G-CJUL_(Roald_Dahl)_taxiing_at_John_F_Kennedy_International_Airport
Norwegian Air UK Boeing 787-9 Dreamliner named Roald Dahl taxiing at JFK Airport. Photo by Adam Moreira  , from Wikimedia Commons
IAG said it bought a 4.6% stake in Norwegian to put the company in a position to begin talks about a potential full offer.

“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 said.

“IAG’s interest in the company confirms the sustainability and potential of our business model and global growth,” Norwegian said in a statement.

Shares in Norwegian Air Shuttle rose 47% after news of IAG’s interest in a bid went public, boosting its market value to about 10.5 billion kroner ($1.35 billion). IAG stock dropped 1.2% – the company has market value of about 12.5 billion pounds ($17.7 billion).

The announcement by IAG comes amid further consolidation among airlines in Europe. Earlier this week the German airline Lufthansa and easyJet made bids for the struggling Italian airline Alitalia.