Staying on the ground
IAG boss has no plans to relaunch takeover bid for Norwegian after rebuffs
WILLIE WALSH, the chief executive of airline group IAG, says he has no immediate plans to hold further talks with Norwegian Air about a possible acquisition after the rival carrier rebuffed two takeover approaches.
Mr Walsh said he and IAG’S board would now be “reviewing all our options” following talks with bosses at Norwegian. The comments, however, prompted Norwegian to release a statement revealing that two “separate conditional proposals” had been made by IAG, although Mr Walsh said these were not formal offers.
“If anything happens, we will disclose it as we are required to do,” he said. “We are reviewing our position and we are not expecting to have to make an announcement in the coming weeks.”
Mr Walsh refused to expand on whether he would make another bid but suggested the approach for Norwegian was a targeted move, rather than being indicative of an aggressive hunt for an acquisition. Industry commentators believe Norwegian has been a thorn in the side for IAG’S transatlantic business, despite IAG posting strong numbers in the first three months of 2018.
The sales figures were boosted by the Easter holidays, which fell early in the year, and by more efficient aircraft, which resulted in lower costs. Group revenues increased by 2.1pc to €5bn (£4.4bn) in the period, while pre-tax profits rose to €885m from €74m, thanks to a one-off €639m gain linked to the closure of one of IAG’S defined benefit pension schemes.
Excluding this exceptional gain, profits still soared, jumping from €93m to €246m. IAG’S cost per available seat kilometre – a key industry metric – dropped 4.3pc to €6.67.
Mr Walsh said the group had 70pc of its fuel requirements hedged for 2018 and suggested those with little or no hedging would struggle because of rising oil prices. He said Norwegian was roughly 25pc hedged.
“I think anyone not hedged is facing a very significant challenge in relation to the fuel price this year,” he said.
Mr Walsh added the summer could prove particularly challenging for airlines without hedging in place because tickets sold in advance would not reflect the higher costs of oil’s recent rise.
“The gap between your revenue and costs widens and I think this will put a number of airlines under stress.”
Mr Walsh also admonished engine maker Rolls-royce, stating he was “very disappointed” with the company for issues related to its Trent 1000 engines.
The airline boss said the problem will result in five or six of his Boeing 787 fleet being grounded.