Is British Airways planning a takeover bid for low-cost carrier Norwegian?

4.61 per cent share of Norwegian purchased by parent company of British Airways in what appears to be start of takeover bid

British Airways’ parent company IAG has purchased a 4.61 per cent share of low-cost carrier Norwegian, famed for its cheap transatlantic flights, sparking rumours of a takeover bid.

Shares in Norwegian have soared by more than a third since word began to spread. Currently their shares are trading at 260.50 Norwegian Krone ($33.35), up 45.29 per cent, according to Bloomberg.

In a statement IAG said that while no talks had taken place, it considered Norwegian “to be an attractive investment”.

Norwegian are now the third-largest budget airline in Europe – Shutterstock British Airways Norwegian takeover bid low-cost carrier
Norwegian are now the third-largest budget airline in Europe – Shutterstock

IAG said they intended to “initiate discussions with Norwegian, including the possibility of a full offer for Norwegian”.

Norwegian are rapidly expanding on all fronts. However, the budget airline lost $117 million last quarter as a result of its efforts to quickly garner market share. It is now Europe’s third-largest low-cost airline.

The low-cost carrier has been putting pressure on British Airways’ transatlantic routes with their no frills approach to travel. BA recently announced they would begin to offer budget seats for travellers in order to compete.

A takeover of the company by IAG would strengthen its hand in the competition against Europe’s low-cost carriers, particularly Ryanair and easyJet.

Brexit Open Skies deal — Ondrej Zabransky / Shutterstock British Airways Norwegian takeover bid low-cost carrier
IAG own British Airways, Iberia, Aer Lingus and Vueling — Ondrej Zabransky / Shutterstock

IAG currently own British Airways, Aer Lingus, Iberia and Vueling. It is registered in Spain and trades on the London Stock Exchange.

Norwegian was founded in 1993 by Bjorn Kjos, a former fighter pilot who is still chief executive. As well as flying to North America, it also has routes to Buenos Aires and Singapore.

The statement from IAG said: “International Airlines Group (IAG) notes the recent press speculation that it is considering making an offer for Norwegian Air Shuttle ASA (Norwegian).

“IAG considers Norwegian to be an attractive investment and has acquired a 4.61 per cent ownership position in the airline (minority investment).

“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 confirms that no such discussions have taken place to date, that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.

“A further announcement will be made if appropriate.”

A statement from Norwegian said: “Norwegian has just been made aware that the International Airline Group (IAG) has acquired of 4.6 per cent of the shares in Norwegian Air Shuttle ASA.

“Norwegian had no prior knowledge of this acquisition before it was reported by the media mid-morning Thursday.

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

“Norwegian believes that interest from one of the largest international aviation groups demonstrates the sustainability and potential of our business model and global growth.

“The company has no further comments at this stage.”