Norwegian drops as it says no to IAG

Pádraig Hoare

Shares in low-cost, long-haul airline Norwegian fell 9% yesterday after it rejected two takeover bids from Aer Lingus and British Airways owner IAG.

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Norwegian said it received two separate conditional proposals from IAG but that they were “unanimously rejected on the basis that they undervalued Norwegian and its prospects”.

IAG, which also owns Vueling and Iberia and is valued at £13.76bn (€15.59bn), bought a 4.6% stake in Norwegian last month. Shares in IAG rose almost 6% as it posted operating profit before exceptional items of €280m for the first quarter, a 75% rise on the same period last year.

The stockmarket values Norwegian at €1.25bn. The airline recently scrapped its winter route from Cork and Shannon to Providence in Rhode Island but has shaken up rivals on the transatlantic, as well as poaching pilots from Ryanair in recent times.

However, the viability of its business model has been called into question by analysts because of mounting costs. IAG boss Willie Walsh told analysts the firm would “look at all of our options in relation to Norwegian” following the rebuffed bid, but said Norwegian could not continue its current growth programme as a standalone business.

IAG shares are within touching distance of new highs after an earnings report showered investors with positive news.

Even without a new acquisition in the form of Norwegian Air, IAG remains a compelling investment,” said Chris Beauchamp at online broker IG.

IAG said in its trading update that growth at Aer Lingus and its low-cost airline Level “reflects the full year impact of new routes launched in 2017”.

The number of staff was unchanged, “while productivity rose 4.1% with improvements at British Airways, Iberia, Vueling, and Aer Lingus”, it said.

Air France-KLM said it had a loss of €118m in the first quarter, sending shares down almost 3%.

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