British Airways owner IAG mullls Norwegian takeover bid

Bloomberg’s Guy Johnson reports on IAG’s possible bid for Norwegian

British Airways parent company International Airlines Group (IAG) is considering buying budget air carrier Norwegian Air Shuttle, in which it recently acquired a 4.6% stake, to increase its presence in the low-priced market.

IAG said in a stock market announcement that it has acquired a 4.61 per cent stake in the airline, which is "intended to establish a position from which to initiate discussions with Norwegian", including the possibility of a full offer for the firm.

IAG says no official discussions have taken place, and the company emphasized that it hasn't decided whether it will make an offer.

Aer Lingus owner IAG said it is considering making an offer for Norwegian Air, a low-priced carrier worth about $1.2 billion, in a deal which would expand its budget offerings and give it control of a struggling rival.

The acquisition of the stake "suggests that IAG feels that there is an opportunity here given the level of the share price, or it could simply be keeping its options open in the event of further difficulties" with Norwegian, said Hewson.

"A partnership that looks to maximize the synergies of the two networks, minimise duplications of capacity and investment on key routes, and use IAG's travel management capabilities to improve Norwegian's expertise in this area could all provide some of the benefits of consolidation without the likely high cost of a deal", they said.

As well as British Airways, Anglo-Spanish firm IAG also owns Aer Lingus, Iberia and Vueling.

The budget airline is trying to crack the transatlantic market by undercutting established rivals but faces pressures to control costs and shore up its balance sheet.

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Shares in Norwegian, a stock which this year has been pounded over worries about its profitability, surged 37% on the news.

Norwegian is a listed company on the Oslo Stock Exchange and is the sixth largest low-priced airline in the world.

The buy-up caught Norwegian by surprise.

"Norwegian has not been in any discussions or dialogue with IAG about the matter".

Other legacy European airlines, along with the global US carriers Delta and American, have responded to the burgeoning low-priced transatlantic competition by offering no-frills, basic economy fares.

Kjos was not available for comment when contacted by Reuters.

Norwegian Air has expanded rapidly over the last 12 months, ordering new aircraft to serve a raft of new routes.

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