IAG is still willing to play the long game with Norwegian. If the price of fuel keeps rising, you'd imagine that the acquisition price would come down.
The CEO of British Airways parent company IAG said he has not spoken to Norwegian airline executives since April but that his airline group is still weighing its options over a potential acquisition.
IAG bought a small stake in Norwegian earlier this year with the intention of discussing a full takeover. Nothing concrete has materialized and Bjorn Kjos, the CEO of Norwegian, has since said other airlines are interested in doing a deal as well.
“We will not be a longer-term shareholder in Norwegian unless we acquire it. So we’re very clear on that,” IAG CEO Willie Walsh said on an earnings call on Friday after the release of the company’s first-half results.
“The small stake that we took was due to, as I said previously, initiating a discussion with Norwegian. We haven’t had any discussions with them since April. I think it was the last contact that I had with them. So nothing to add to what I’ve said.
“But if we decide that we’re not going to proceed, we’re not going to hold onto the shares, and we’re very clear on that. But obviously, if there’s something to say, we’ll see it and nothing to say at the moment.”
Any deal for Norwegian would supplement IAG’s own growing low-cost, long-haul brand Level, which it has grown since launch last June.
The airline flies long haul from Barcelona and Paris, and short haul from Vienna.
Walsh described its performance as “very encouraging” but stressed that it was still “early days”.
The long-haul fleet will grow to seven A330-200 aircraft in Paris and Barcelona next year.
Air Traffic Control Strikes
Like other European airlines, IAG’s carriers have suffered because of air traffic control strikes in France. Low-cost unit Vueling incurred an additional $23 million (€20 million) of disruption costs as a result.
“These strikes are also having a significant negative impact on the Spanish economy and tourism,” Walsh said.
IAG revenue increased 3.1 percent to $13 billion (€11.2 billion) with operating profit before exceptional items up 17.4 percent to $1.3 billion (€1.1 billion).
The company’s pre-tax profit of €1.9 billion (€1.7 billion) was skewed by a reduction in pension liability, amounting to a $785 million (€678 million) accounting gain.
Despite the boost in profitability IAG’s share price dropped because profits did not meet investors’ expectations.
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Photo credit: A British Airways aircraft. Parent company IAG is still mulling a deal for Norwegian. British Airways