This is huge news, and seemed to come out of left field. IAG has acquired a 4.61% ownership stake in Norwegian, and is considering the possibility of a full takeover of the airline. IAG is the parent company of British Airways, Iberia, Aer Lingus, and LEVEL, and Norwegian has been one of their biggest competitors for the past few years.
Here’s the statement that IAG has issued regarding their investment and a potential takeover:
“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.”
Suffice to say that the implications of this would be massive.
British Airways is the UK’s largest global airline, and they have the most combined slots at Heathrow and Gatwick Airport. Norwegian is an ultra low cost carrier that has increasingly been giving British Airways a run for their money. Norwegian has put downward pressure on British Airways’ yields, and has caused British Airways to launch several routes out of Gatwick Airport to compete.
While I can’t blame IAG for what they’re trying to do here, a takeover like this would be terrible news for consumers, especially given that this is one of the few ultra low cost carriers to operate longhaul flights out of the UK.
Given that no discussions have happened between IAG and Norwegian yet, it remains to be seen what Norwegian’s interest level here is. The airline has a couple of big investors (including the CEO), so they’ll have to be onboard if there’s any chance of a successful full takeover.
While Norwegian has been growing at a fast pace, the airline hasn’t been performing well financially, as they’ve been losing money and also running out of cash to fuel further expansion. Their growth in many ways seems similar to some tech companies, where their focus is on increasing market share rather than profitability.
It remains to be seen what British Airways would want to do with Norwegian — would they essentially operate them alongside LEVEL (their ultra low cost carrier), and if so, would they continue to expand Norwegian, or would they try to curb the expansion? It seems most logical that they’d continue offering ultra longhaul flights with Norwegian, but that they’d move those flights out of the UK, and to other points in Europe instead.
Interesting times, and for sake of consumers I really hope we don’t see a deal here…
What do you make of IAG’s attempted takeover of Norwegian?