In mid-April IAG (the parent company of British Airways) acquired a 4.61% ownership stake in Norwegian. This seemed to come out of left field, as there weren’t really rumors of this leading up to the announcement. IAG also expressed interest in the possibility of a full takeover of Norwegian.
Long term this move isn’t surprising — Norwegian is trying to grow but is losing money, while British Airways is profitable and views Norwegian as their biggest competitor. It’s only natural that they’d love to eliminate their biggest competitor. While British Airways has been claiming they don’t need Norwegian, they’ve made at least two takeover attempts, with more on the horizon.
At this point it seems like a given that Norwegian will be taken over, it’s just a question of how much it’ll cost. As it turns out, though, it looks like it’s not just British Airways that’s interested in Norwegian anymore.
Norwegian shares are way up today as there are reports of Lufthansa also being interested in a Norwegian takeover. Lufthansa’s CEO has revealed that the airline has been in touch with Norwegian regarding a possible takeover:
“In Europe, everyone is talking to everyone. There’s a new wave of consolidation approaching. That means we are also in contact with Norwegian,” Carsten Spohr was quoted as saying by Sueddeutsche Zeitung on Monday.
Asked whether Norwegian would fit with the Lufthansa group, Spohr said: “Takeovers are always a question of strategic value, the price and anti-trust. There are no easy answers.”
At this point it sounds like discussions are still in the early stages, though it’s still interesting to hear the CEO of another major European airline talk about interest in Norwegian. Call me crazy, but I almost wonder if Lufthansa’s CEO isn’t too serious about this, but rather has just revealed it in hopes of driving up Norwegian’s shares and preventing a British Airways takeover, or at least greatly increasing the purchase price.
IAG and Lufthansa Group are two of Europe’s biggest airline conglomerates, and they both have their own low cost carrier subsidiaries — IAG has Vueling and LEVEL, while Lufthansa has Eurowings.
If IAG were able to take over Norwegian, they’d become even more dominant in the UK, as they’d be able to combine British Airways and Norwegian. This would be bad for consumers, as it would lead to higher fares and less choice. Right now Norwegian keeps British Airways in check when it comes to pricing, and if the two airlines have the same parent company, you can bet that won’t happen anymore.
Lufthansa’s rapidly growing low cost carrier is Eurowings. While Eurowings flies to the UK, they’re much stronger in Germany and other parts of Europe. I do think it would be better news for consumers in the UK if Lufthansa took over Norwegian, since they’d presumably continue to compete with British Airways. Alternatively, I could see Lufthansa using Norwegian as a way to quickly grow their Eurowings division, and position those planes out of other areas of Europe. Given the expected high cost of a deal here, I don’t think that’s too likely, though.
Bottom line
Norwegian is losing money, and it looks like that won’t be changing anytime soon. At the same time, the airline is good for consumers, not just because of the low fares for those who fly with them, but also because of the competition they give other airlines, which helps to drive down fares.
Norwegian remaining independent would be best for consumers, assuming they can stay in business. But given that they lose money, that seems unlikely. I suspect at this point it’s just a function of finding the price at which they can be bought. We might even see a good old bidding war.
What do you think — would you rather see IAG or Lufthansa Group take over Norwegian?
I wonder if they mean the whole Norwegian group (UK, Argentina etc) or just the UK division?
I think it makes more sense for IAG to inherit it and replcae LEVEL with Norwegian since they have so much more market appeal and brand recognition.
It would make no sense for anybody to purchase Norweigian and not use the brand. The whole value is their name which makes me think Lufthansa has no interest...
I wonder if they mean the whole Norwegian group (UK, Argentina etc) or just the UK division?
I think it makes more sense for IAG to inherit it and replcae LEVEL with Norwegian since they have so much more market appeal and brand recognition.
It would make no sense for anybody to purchase Norweigian and not use the brand. The whole value is their name which makes me think Lufthansa has no interest in the slightest since it has no trouble with Eurowings brand.
However LEVEL is just a strange entity within the IAG group.
This also makes me think Air France/KLM would want to big to replace JOON as Norwegian staff are likely paid less than their mainline crew which was the whole point of JOON.
It will be interesting how this develops but perhaps even a joint bid between IAG and another could be on the table.
As Norwegian would only need a finacial backer like how Virgin isn't owned outright but big shares are by companies that have the big bucks.
Lufthansa should've kept bmi in the first place lol
How long till Air France/KLM put a bid in even if they don't have true intention to purchase? I would think AF/KLM have the most to gain from the acquisition as their ambition has been limited for the past several years.
I suspect this is Lufthansa just trying to drive up the price and make the acquisition a lot more expensive/painful for IAG.
As another commenter pointed out, Lufthansa has said for years they don’t want to expand Eurowings to build hubs outside their existing central/Northern European strongholds. Buying an unprofitable LCC in the U.K. after their previous experiences of losing. Tons of money on a UK regional airline makes very little sense. Also note...
I suspect this is Lufthansa just trying to drive up the price and make the acquisition a lot more expensive/painful for IAG.
As another commenter pointed out, Lufthansa has said for years they don’t want to expand Eurowings to build hubs outside their existing central/Northern European strongholds. Buying an unprofitable LCC in the U.K. after their previous experiences of losing. Tons of money on a UK regional airline makes very little sense. Also note the fleet commonality issues why would Lufthansa group want to inherit a large collection of 737s and 787s which they don’t operate in any of their other divisions?
Norwegian will surely go to IAG or fold, I can’t imagine it makes sense for Lufthansa group to pay up for them.
Although prices have corm down, I blame the existence of Norwegian for basic economy transatlantic fares, where the same fare previously bought me at least 1 checkin luggage, I have to pay more today for the nonsense that Norwegian has created.
And then there is Brexit. Whether Norwegian would technically a UK airline or a German one, or based somewhere else would add another whole layer of complexity.
Norwegian is the only EU airline that is legit ...
Be it Lufthansa or IAG.... ITS NOT FOR SALE!!!!
I was rather surprised to read this. LH has repeatedly said that they have no interest in having Eurowings hubs in other parts of Europe outside of Germany, Switzerland, Austria & Belgium. Rome is a different story were they to take over tired Alitalia. I honestly fail to see how Norwegian fits into their Eurowings concept.
Remember LH had a huge stake in UK's now collapsed BMI which they ended up selling to BA. They...
I was rather surprised to read this. LH has repeatedly said that they have no interest in having Eurowings hubs in other parts of Europe outside of Germany, Switzerland, Austria & Belgium. Rome is a different story were they to take over tired Alitalia. I honestly fail to see how Norwegian fits into their Eurowings concept.
Remember LH had a huge stake in UK's now collapsed BMI which they ended up selling to BA. They also sold their 19% stake in JetBlue - but that was a time when they were making losses.
Since then they've been concetrating on their core home markets. Interest in Norwegian may mean that that long rumoured intent to buy SAS isn't going through.
Lufthansa has rather sinister ambitions...and very plain lounges. Obstentacious they are not.
competition = best prices for consumers.
the merge should be banned.
Lufthansa can have them. I've said earlier it would make sense for IAG to buy them, merge them with both Level and Vueling, and recentre all their low-cost operations in LGW and STN. Then they could keep all the "premium" (if you can say that about BA anymore) out of LHR. But in truth, it does harm the consumer of more traffic goes IAG's way. They already have all the slots at LHR, nobody wants...
Lufthansa can have them. I've said earlier it would make sense for IAG to buy them, merge them with both Level and Vueling, and recentre all their low-cost operations in LGW and STN. Then they could keep all the "premium" (if you can say that about BA anymore) out of LHR. But in truth, it does harm the consumer of more traffic goes IAG's way. They already have all the slots at LHR, nobody wants them take over the majority of LGW's.
Lufthansa makes sense, they have little to no footprint departing the UK to non-German destinations. Plus, long-haul low cost. They might need to raise the prices slightly to make sure they're profitable though...
Absolutely NOT Lufthansa. Their agenda is pretty clear: European ,if not world ,domination. The thought is creepy and their plan should be resisted.
For the love of all things holy I hope the EU won't allow it