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.

Norwegian Air UK Boeing 787-9 Dreamliner named Roald Dahl taxiing at JFK Airport. Photo by Adam Moreira  [CC BY-SA 4.0], 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.