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British Airways Owner, IAG Sells Stake in Loss-Making Norwegian: Shares Tumble

British Airways Owner, IAG Sells Stake in Loss-Making Norwegian: Shares Tumble

British Airways Owner, IAG Sells Stake in Loss-Making Norwegian: Shares Tumble

Shares in low-cost long-haul airline Norwegian have tumbled by over 21% on the Oslo Stock Exchange after one of Europe’s largest airline groups announced it was no longer interested in buying the carrier and would be selling its remaining shares.  The news was announced earlier today by IAG, who own British Airways and Iberia – the stock market was quick to react and has left the company’s share prices bruised.  Over the last 12-months, Norwegian has lost over 37% of its value.

“International Airlines Group (IAG) confirms that it does not intend to make an offer for Norwegian Air Shuttle ASA and that, in due course, it will be selling its 3.93 percent shareholding in Norwegian,” the company was quoted as saying by the Reuters news agency.

IAG originally acquired a 4.61% stake in Norwegian back in April 2018, in what was a shock move by the aviation group and one that even took Norwegian’s by surprise.  The Madrid-based IAG submitted two bids to take over Norwegian but these were both knocked by the Nordic-airline’s management board.  At the time, Norwegian chief executive Bjorn Kjos said IAG had seriously unvalued his airline.

Willie Walsh, who was previously chief executive at British Airways and now heads IAG has long suggested the group might sell its stake in Norwegian and would instead pursue expanding its own low-cost, long-haul LEVEL which is based out of Barcelona.  The markets may well have been hoping that IAG would come back with a third offer but this now looks unlikely.

Norwegian has recently embarked on a $200+ million cost-cutting programme after the airline’s rapid and aggressive expansion has taken a toll on its finances.  The carrier was even forced to dismiss speculation that it was on the verge of bankruptcy over the Christmas period.

“Norwegian’s plans and strategy remain unchanged. The company’s goal is to continue building a sustainable business to the benefit of its customers, employees, and shareholders,” the airline’s chairman Bjoern Kise was quoted as saying in a statement.

Why IAG chose now to make this announcement remains unclear.  Had the two companies remained locked in secret talks that have failed to come to fruition?  Does IAG now think the time is right to sell its shares and cause Norwegian maximum damage?  Perhaps, IAG is doing this deliberately to lower the value of Norwegian and come in with a hostile takeover?  Or maybe IAG is just doing some much-needed admin before the end of the financial year?

What also remains unclear is whether another airline group like Lufthansa will now make a bid for Norwegian.  Or perhaps the airline will find a White Knight investor like Indigo partners?  This could well prove to be a very interesting and make or break for the plucky and well-liked Norwegian

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