British Airways owner considers Norwegian bid

Boeing 787 Dreamliner in colours of low-cost carrier NorwegianImage copyright
Norwegian

The owner of British Airways may bid for Norwegian Air Shuttle, the fast-expanding budget airline.

Buying the airline would allow International Airlines Group to increase its market share amid rising competition from low-cost carriers.

Norwegian said it had not been aware that IAG had acquired a 4.6% stake until media reports on Thursday.

Shares in Norwegian surged 38% after news of the bid interest emerged, while IAG fell 0.5%.

Norwegian said it has not held talks with IAG but said the interest “confirms the sustainability and potential of our business model and global growth”.

IAG said it had bought a minority stake in the airline with a view to opening talks about a deal.

“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 said.

However, it said no discussions have taken place and it had not decided whether to make an offer.


Analysis: Simon Jack, BBC business editor

Norwegian has been ruffling feathers in the aviation market, bringing a budget airline model to the long-haul sector. The industry is divided as to whether it works when you cross the Atlantic.

Norwegian has bet big that it does. Starting life as a short-haul carrier, it has nearly 200 long-range aircraft on order and the legacy carriers have had to respond.

BA is dabbling with its own offshoot, Level, and announced cheaper fares for BA long-haul passengers not checking in bags and not wanting food and drinks included in the fare. Air France’s Joon is also trying to cut long-haul costs.

Norwegian is still losing money and its finances are stretched by the number of planes it is buying, but today’s announcement from BA suggests Norwegian has proved the concept is sound.

Whether passengers are best served by a legacy carrier swallowing a competitive upstart is another debate.


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Getty Images

Norwegian Air has earned a name for its low-cost deals, such as £99 one-way flights from Edinburgh and Dublin to New York.

However, it posted a larger-than-expected loss in its first quarter and had to raise fresh funds earlier this year to cope with its rapid expansion and higher fuel costs.

Nevertheless, its move into discount intercontinental flights has shaken up the market and forced bigger rivals such as IAG and Air France to take measures to win back customers.

IAG has already expanded its budget Level and Aer Lingus long-haul divisions, while adding European airport slots from failed UK rival Monarch Airlines.

This week BA began selling “Basic” tickets from London to destinations including Boston, Delhi, Dubai, Hong Kong and Singapore.

Fares start from £143 but passengers must pay £60 to check a bag and £20 for seat selection.

Simon Calder, travel editor of the Independent, told the BBC: “The main purpose of this initial move is to get more competitive with Norwegian, which is building an extensive network from Gatwick and poaching passengers from British Airways. Most of the first 10 destinations are on the Norwegian network.”

Shares in IAG were down about 1% after news of the potential tie-up with Norwegian was first reported by Bloomberg.

British Airways owner considers Norwegian bid

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