BA’s owner lines up Norwegian take-off
THE owner of British Airways is considering a bid for Norwegian Air Shuttle to boost its low-cost long-haul services.
FTSE 100 group IAG, formed from the merger of BA and Spanish carrier Iberia in 2011, has bought a 4.61 per cent stake in the fast-growing budget airline Norwegian, one of its main rivals for transatlantic passengers.
Shares in Norwegian, which have given investors a bumpy ride amid concerns over its profitability and rapid expansion, soared by 47 per cent, giving it a value of more than £900million.
IAG, led by CEO Willie Walsh, said: “IAG considers Norwegian to be an attractive investment. The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer.” It said no talks had taken place, it has “taken no decision to make an offer and there is no certainty any such decision will be made”.
Norwegian, which had “no prior knowledge” of IAG’s stake before it was reported yesterday, said: “The interest from one of the largest international aviation groups demonstrates the sustainability and potential of our business model and global growth.”
The world’s sixth biggest low-cost airline, which began as a Nordic regional short-haul rival to the likes of Ryanair and easyJet in 2002, carries 5.8 million UK passengers each year from London Gatwick, Edinburgh and Manchester to 50 destinations worldwide. Four years ago it launched low-cost long-haul flights to America and has added services to Buenos Aires and Singapore.
IAG last year launched low-cost airline Level, offering transatlantic flights initially from Barcelona.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Norwegian has in the past few years undergone an explosive growth path. This has inevitably raised concerns that the airline might be overextending itself.
“This morning’s news might suggest 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. Time will tell.”