British Airways’ parent-company IAG has bought a near 5% stake in low-cost airline Norwegian Air with a view to buy the airline outright.
The 4.61% stake acquired by IAG, who are the parent-company to British Airways, Iberia, Aer Lingus, Vueling and Level, seems to be the first step in a possible takeover.
“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
The move shows how Norwegian’s entrance into the long-haul market has ruffled feathers in recent years. In the last few years Norwegian have begun offering long-haul flights across the Atlantic for as little as £99 – something IAG just couldn’t compete with.
Norwegian are able to offer these low fares because of the ‘pick and choose’ business model they have established. While no-frills travel has become the norm in short-haul flying over the past 10 years, this model has only recently taken to long-haul flights. While passengers flying with British Airways would be given extras such as checked baggage and food included in the ticket, Norwegian would make passengers pay extra.
National carriers have been battling with the issue of being priced out by low-cost carriers a lot recently with Air France launching ‘JOON‘, British Airways and Virgin Atlantic launching basic fares without checked baggage and BA going 10-abreast out of Gatwick. This move certainly shows how Norwegian are a large threat to the industry as we know it.
With Norwegian’s large route network it is easy to assume they are doing very well but their results suggest otherwise. While a profit was made in 2016, Norwegian posted results for 2017 which showed they had made a net $38.5m loss. In March, Norwegian announced plans to raise more money by selling aircraft and its frequent flyer scheme.
Whether this takeover is finalised or not, it shows the impact that low-cost carriers are having on the aviation market.
Will this bid develop into a Norwegian takeover? Get involved by using the hashtag #londonspotter on all platforms.