IGA, known as International Airline Group, is a company set on dominating the European Atlantic long-haul market. It was founded as a merger of British Airways and Spanish Iberia Airways and has ties to Aer Lingus (Irish), LEVEL, Qatar Airways and the focus of this article, a 4.6% stake in Norwegian Air Shuttle, that they would very much like to own outright.
IGA runs a mix of low-cost airlines and flag carriers and has a fleet of 550 aircraft, with over 100 million passengers per year. This is compared to Norwegian, who flew 33 million passengers a year in 2017, with just over 500 routes.
Norwegian, is a long-haul low-cost airline that travels extensively from Europe to Asia and the Americas (North, Central and South). They operate on as cheap as possible airfares (A one-way flight New York to London can be as cheap as $89 USD) but make up for it with passengers having to buy everything on board. And by everything, we truly mean everything, from pillows to food, baggage to headphones.
This has led to Norwegian being incredibly successful, with their route list constantly expanding to new destinations and appearing at many rivals airports. They have been so successful that they can’t get enough planes (They have 220 on order), ‘wet-leasing’ an entire A380 from HiFly to service their popular London to New York route.
This has not been without cost, however, with the airline posting massive losses in 2017 and barely making a profit of $36 million in the first half of 2018. This slow financial growth has led to competitors, particularly IAG, smacking their lips in anticipation in a takeover bid.
IAG’s efforts so far
IAG has made two take-over bids of Norwegian so far, offering the public investors a fair deal for the shares. However, both times the board of directors and shareholders have voted in favour of staying independent.
After these failed attempts they are no longer keen to be at the table if Norwegian are not going to sell the farm.
“We’re not going to keep the shares, we’re not an investor. We bought that small stake to initiate a conversation and if that conversation is not going anywhere, as it’s not, we’re not going to hold on to those shares.” – Willie Walsh, chief executive of the IAG airline group
It has also been revealed that IAG is not the only airline at the table, with Ryanair and Lufthansa Group rumoured to be making passes at acquiring the airline.
Why does IAG want Norwegian so badly?
“If we buy Norwegian, at the right price, do we take out a competitor that could wreak financial harm by charging lower fares than we are able to profitably match?’ – IAG
On the top level, IAG sees Norwegian as a competitor and want to secure control of the North Atlantic airline trade.
IAG is also very keen to replace their ageing British Airway fleet, and with Norwegians planes (new Boeing 787’s) having an average age of only 3.6 years, they could easily buy the airline to acquire their fleet.
And if you can’t join them, you can try to beat them. IAG has started up a new airline called LEVEL that uses the same business model as Norwegian (Low cost and long haul). They currently have a mixed craft fleet of eight planes and plan to have another fifteen by 2022.
And what does Norwegian think of all this rumour of a takeover?
“We’ve never been working towards acquisition, we’re working towards being an independent, profitable company, and that hasn’t changed.” – Norwegian Statement