The owner of British Airways, International Airlines Group (IAG), is said to have made two offers to buy Norwegian Air Shuttle, both of which were unanimously rejected.
IAG already owns 4.6% of Norwegian and appears to be trying to improve its position amidst low-cost competitors. The offers are said to have been made after IAG announced a significant year on year increase in underlying earnings of around €120 million for the first quarter of 2018.
On the other hand, Norwegian posted a net loss last year and has had to raise funds to cope with higher fuel costs and its own rapid expansion. However, the budget airline says the offers received from IAG, which were to buy the entire company, undervalued the airline and its potential.
Following the news, Norwegian shares dropped 10%, while IAG was up 5.6% on the FTSE 100.
Norwegian is well-known for its low-cost deals, notably between the UK and New York. This has posed a threat to airlines such as BA who have traditionally dominated the intercontinental flight market. Level, IAG’s low-cost long-haul competitor for airlines such as Norwegian, started flying from Barcelona in June 2017 and soon expanded to add routes from Paris.
Norwegian is rumoured to have received interest from other parties once IAG’s failed bids had been announced. It remains to be seen whether further bids will be put forward and if this will encourage IAG to increase its offer.
