The owner of British Airways has been snubbed by a new upstart airline – and not once but twice.
There had been two occasions that IAG, the parent company of British Airways, had presented offers to buy out the newly set up Norwegian Air Shuttle. However, it had been refused the deal on both the occasions because the offers from the IAG had grossly undervalued the Norwegian airline and as well as the prospects of growth tin the future, said the Norwegian airline recently.
There was confirmation about the two offers the were made to the Norwegian airline by IAG, which is also the owner of two other airlines – Iberia and Aer Lingus. However, the talks had “ended without an agreement” and it was “currently considering its options”, said the industry giant.
There was fall of as much as 11 per cent in the price of shares of Norwegian. On the other hand, there was a rise of 4.5 per cent in the price of the shares of IAG. The British company reported its first quarter earnings on Friday.
Offering ultra-cheap transatlantic flights to customers originating at the three base airports at London, Paris and Barcelona, Norwegian, one of Europe’s newest airlines, has got the attention of the industry and raised eyebrows about its revenue model.
In 2017, about 33 million passengers were ferried by the upstart through the about 500 flying routes that it now has in its kitty that covers more than 150 destinations. In comparison, 105 million flyers were carried by the airlines owned and operated by IAG.
Signals about a potential acquisition of the budget airline was given by IAG earlier in April this year when it had announced that it had bought a 4.6 per cent take in the Norwegian. But there was disappointment for investors who had been hoping for a positive update on Friday.
“Ultimately the silence of the topic proved telling, with shares in Norwegian tumbling as investors began to write off the possibility of a full acquisition by IAG,” said Chris Beauchamp, chief market analyst at IG.
The position retained of Norwegian is quite enviable, said other analysts.
“IAG is keen to procure Norwegian for the cheapest possible price — and that’s unlikely to happen,” said Saj Ahmad, an aviation analyst at StrategicAero Research.
By turning down the deals, Norwegian may be signaling that it has plans to go it alone or it may be holding out for a higher offer or an alternate bidder, Ahmad said.
“[It] has the ability to call the shots,” he said.
(Adapted from MoneyCNN,com)