Published: Fri, April 13, 2018
Economy | By Shawn Conner

Norwegian Air stock takes off as IAG buys stake

Norwegian Air stock takes off as IAG buys stake

IAG (International Airlines Group) revealed it has acquired a 4.61% stake in the airline "to establish a position from which to initiate discussions, including the possibility of a full offer for Norwegian".

However, IAG clarifies that to date "has not had discussions for this possible operation, has not made any decision on formulation of an offer of acquisition at this time and that re is no certainty as to wher such a decision will be made".

Norwegian said in a statement released via the Oslo stock exchange that it had been unaware that IAG had acquired a stake until press reports Thursday morning and had not held any discussions with the airline group.

The airline said it had no prior knowledge of IAG's actions, but welcomed the investment.

"Norwegian believes that interest from one of the largest worldwide aviation groups demonstrates the sustainability and potential of our business model and global growth".

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The firm has shaken up the long-haul market by offering flights at knockdown prices.

IAG, which also owns Iberia, Aer Lingus and Vueling, confirmed suspicions that the purchase signalled a broader interest in acquiring the company.

The budget airline is trying to crack the transatlantic market by undercutting established rivals but faces pressures to control costs and shore up its balance sheet.

The Norwegian airline has experienced a strong expansion in recent years which has meant an additional financial effort.

IAG's interest in Norwegian is likely driven in part by the Norwegian's strong presence in London, where it is the third-largest carrier at Gatwick airport.

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Adding Norwegian's short-haul operations in Europe to Vueling would create a budget carrier better placed to compete against the continent's two biggest low-priced airlines Ryanair and easyJet.

The buy-up caught Norwegian by surprise.

IAG said in a statement it considered Norwegian to be an "attractive investment".

Ryanair last month agreed to buy a majority stake in a new Austrian leisure airline founded by Formula One former champion Niki Lauda, while easyJet bought a parts of failed airline Air Berlin past year.

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