MONACO — European low-cost carrier Norwegian Air Shuttle ASA is trading up over 20% amid news that the International Airlines Group has purchased a 4.61% stake in the carrier.
In a statement on IAG’s investor relations site, the company said: “The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian.”
After several years of rapid growth to their European and transatlantic fleet, Norwegian has recently shown signs of financial struggles. In late 2017, Ryanair’s controversial CEO Michael O’Leary caused concern when he said “Norwegian will go in four or five months.
They are running out of cash. Both Monarch and Norwegian are in trouble. It’s an open secret among airlines that Monarch and Norwegian may not survive through the winter. They are burning cash.”
In Norwegian’s 2017 financial results, the carrier reported larger than expected losses and high costs. Norwegian CEO Bjorn Kjos responded to the results by saying: “We are not at all satisfied with the 2017 results.”
Kjos added: “Norwegian is far better positioned for 2018, with stronger bookings, a growing network of intercontinental routes complementing our vast European network and, not least, a better staffing situation.”
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To improve their cash flow, Norwegian recently completed a sale and leaseback deal for six 787 Dreamliners. The airline expects the deal to improve their liquidity by $250 million. Boeing’s latest order book reflects this decrease of aircraft on order.
Responding to reports that IAG has made an offer to purchase Norwegian outright, IAG Chief Financial Officer Enrique Dupuy de Lôme said: “IAG confirms that no such discussions have taken place to date, that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.”
The International Airlines Group owns a portfolio of airlines throughout Europe including Aer Lingus, British Airways, Iberia, LEVEL, and Vueling. The addition of Norwegian Air to their portfolio dramatically alters the low-cost airline industry in Europe. IAG already owns two direct low-cost competitors to Norwegian Air in Vueling and LEVEL.
Barcelona based Vueling operates a fleet of 100+ A320 family aircraft and has established itself as the dominant low-cost carrier in Spain. LEVEL, which began operations in June of 2017, operates two A330-200s and is a direct response by IAG to the growing threat of Norwegian’s long-haul arm.
In addition, IAG is minority owned (20.01%) by Qatar Airways who also holds a 49% stake in Air Italy (formerly Meridiana). Qatar has ambitions to turn Air Italy into a significant transatlantic carrier with a fleet of 30 787-8 Dreamliners and 20 737 MAX 8s, and five A330-200s.
The first A330-200 for Air Italy is currently being painted into the Air Italy livery before it begins domestic Italian flights in May.
Norwegian Air currently operates a fleet of 124 Boeing 737s and 27 787 Dreamliners.