Yesterday (April 12th) saw International Airlines Group (IAG), the owner of British Airways, announce that it had acquired a 4.61% stake in Norwegian Air, the low-cost rival that has been disrupting Europe’s airline industry by launching cheap long-haul flights.
In a press release IAG confirmed that it had purchased the stake in the Norwegian carrier, for the purpose of initiating discussions with Norwegian “including the possibility of a full offer”. However, stressed that no discussions had yet taken place.
IAG has taken advantage of a recent weakness in Norwegians shares, as the low-cost airline has faced increased questions about its finances. The rapid growth of the airline has put pressure on costs; it continues to lose money despite the rest of the industry being in good shape.
Although IAG gave no reason for their move on the Oslo-based carrier, analysts have quickly homed in on its rapidly expanding low-cost long-haul operation based at London Gatwick, with fairs as low as £143.
With lots of legacy costs making it difficult for BA to build low-cost long-haul operations, such a move by IAG would be a good fit.
It will be interesting to see how developments unveil, with such a move having the potential to stop the “race to the bottom” that has been occurring in recent years.