British Airways parent, IAG, is considering a bid for discount trans-Atlantic leader Norwegian, a deal that could seriously reshape the current airline picture, which pits legacy airlines against upstart discounters.
IAG showed its hand today with a brief statement acknowledging that rumors had been floating. The statement said "IAG considers Norwegian to be an attractive investment and has acquired a 4.61 percent ownership position in the airline... 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."
So far, no discussions have taken place between the two, and none are scheduled, but the news pushed Norwegian's shares on the Oslo stock exchange up as much as 47% before settling at 38%.
It's an interesting twist. IAG, which also operates Iberia, Vueling and Aer Lingus, has a recently-started discount line called Level, whose main purpose is to compete with Norwegian and others in the low-fare long-haul market, to which its legacy airlines have been losing customers.
At the same time, Norwegian's rapid expansion of fleet and routes, and future plans have left it short of cash. A significant IAG investment, or takeover, might look very tempting to Norwegian's shareholders, who are not yet making profits, as the airline posts losses.
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