British Airways-owner IAG has built up a 4.61 percent stake in rival Norwegian and wants to start discussions about a potential takeover offer.

Although no talks have yet taken place, IAG’s eagerness indicates that an acquisition is a possibility but the airline group, which includes Iberia, Aer Lingus and Vueling, said that at the moment there was no concrete offer on the table.

Norwegian said it was unaware of the share acquisition but that the approach demonstrated the “sustainability and potential” of its business model.

The shock move is likely the start of a long-running battle, pitting combative IAG CEO Willie Walsh against the affable Bjorn Kjos, his counterpart at Norwegian.

What Is IAG Playing At?

Norwegian has enjoyed a remarkable — although sometimes bumpy — rise since starting as a regional airline in 1993.

After morphing into a low-cost airline in 2002, Norwegian started to expand, ordering new aircraft and launching long-haul routes from Europe to Asia and North America.

Many of the established low-cost and full-service carriers treated Norwegian’s business model with skepticism. After all, the likes of Freddie Laker, had tried a similar thing in the 1970s but couldn’t make it work.

Gradually, however, British Airways, Air France-KLM and others moved to copy Norwegian by developing new low-cost airlines of their own and introducing unbundled fares.

And while others have wanted to imitate Norwegian, the airline has endured its fair share of struggles in recent years.

Ryanair CEO Michael O’Leary launched a scathing attack on the airline last September, insisting that it was close to bankruptcy. Norwegian denied this but did report an annual loss of $137 million for 2017.

Norwegian’s struggles beg the question: Why does IAG want to buy it?

In the past, IAG’s Walsh has made no secret of his admiration for Norwegian. Speaking with Skift in 2016 he said IAG had “watched with interest what Norwegian has done” regarding its fare unbundling.

And after seen Norwegian’s success, Walsh even launched his own low-cost long-haul airline, Level.

Analysts at Credit Suisse said there were two different ways to view IAG’s interest in adding Norwegian to its portfolio of airlines.

We view this as both a defensive move, which validates Norwegian’s potential to gain market share from British Airways, while also seeking to prevent this happening, and also an offensive move seeking to gain access to a modern fleet of narrow and widebody aircraft to accelerate IAG’s developing long haul low cost ambitions,” they said in a note to investors.

Would Norwegian Sell?

Last year was definitely one to forget for Norwegian but this has not sated Kjos’s appetite for expansion.

At a press conference in London earlier this year he outlined his plans to grow the business in 2018, adding that the company had solved many of the problems that had hurt it during the previous 12 months.

Theres should be more visibility on that when the company reports its first-quarter results later in April.

If IAG is serious about buying the company it will need Kjos’s support. Together with chairman Bjorn Kise, Kjos is the joint owner of HBK Invest, the single largest shareholder in Norwegian with a stake of just under 25 percent.

At the moment, it is not known how much IAG will have to spend to buy Norwegian, but analysts at Bernstein speculate that it might be higher than expected.

Shareholders like Bjorn Kjos [the current CEO] and Folketrygdfondet [a state pension fund in Norway] have been with the company through many peaks and troughs in recent years, and may be inclined not to sell without a substantial premium,” they said.

Given his ownership of the business and the length of time it has taken him to turn Norwegian into a viable airline, it is unlikely that Kjos will go quietly.

Photo Credit: A Norwegian aircraft. IAG is looking into buying the carrier. Norwegian