When IAG’s tenacious Willie Walsh sets his eyes on a target he doesn’t give up. The boss of British Airways and Iberia has made not one takeover approach for the Norwegian Air Shuttle low-cost carrier, but two.
But Norwegian’s founder and chief executive, the irascible Bjorn Kjos, is playing hard to get.
He has rebuffed IAG’s conditional approaches, claiming they value Europe’s third-biggest low-cost carrier too cheaply.
Kjos, who with chairman Bjorn Halvor Kise, still control nearly 40 per cent of Norwegian’s stock, will be disappointed its shares went into a tailspin after news of their rejection, valuing the airline at £1billion.
Norwegian Air Shuttle’s founder and chief executive, the irascible Bjorn Kjos, has rebuffed IAG’s approaches, claiming they value Europe’s third-biggest low-cost carrier too cheaply
But they should not be too disappointed. Shares are still up 61 per cent from when IAG put the stock in play after revealing it had built up a 4.6 per cent stake.
Walsh wants to take out the Viking raiders to eliminate a fierce competitor which has revolutionised the industry with low-cost long-haul flights, and is now creeping onto IAG’s home turf in London, Latin America and soon Asia.
It’s only four years since Norwegian first began flying long-haul transatlantic. Yet the young carrier has been a trailblazer, transforming the market by offering 60 flights from 15 US airports to countries across Europe at fantastically competitive prices.
More cleverly, it has created a new market by attracting a different breed of customers who will fly for less and without the frills – even if its means the occasional timezone error with gnocchi being served at breakfast.
Norwegian’s strategy has been so effective that British Airways, which also operates low-cost carriers Air Lingus and Level, has tried to imitate its pricing structure by putting more seats on board its planes too.
Kjos compares his success in unsettling the airline industry to the way Spotify has disrupted the music scene, that Netflix is doing to entertainment and how Tesla is creating havoc in the motor industry.
The former paratrooper also likes to make a point – a recent flight from JFK to Gatwick set a record of five hours and 13 minutes.
His next bet is on his new 737 MAX planes being able to fly more routes per day – keeping costs down – into secondary airports like Providence or Stewart in the US because the time for turnarounds is less than at the bigger airports.
Yet Norwegian’s rapid expansion has come at a cost. It is bleeding cash, has high debts and some query its long-term survival flying solo.
That’s why there is a case for Norwegian being better off in the more stable arms of a profitable carrier such as IAG.
What then for prices if Walsh were successful in bidding for Norwegian? With such a dominant owner as IAG, surely prices would shoot up?
Airline expert John Strickland says that’s unlikely to happen because Norwegian has shown so vividly there is a long-haul customer market, one that is predicted to double over the next 20 years.
Rather than suffocate the brilliance of Norwegian’s piratical spirit, he says that being part of a more secure owner would help consolidate Europe’s still fragmented airline industry.Here’s a figure to surprise you.
Europe’s five leading airlines – the three big networks such as IAG, Lufthansa and Air France-KLM, and the two dominant low-cost carriers, Ryanair and EasyJet – between them control only half of the European airline market.
The balance is made up of charter, niche players and small national airlines which, in the main, are unprofitable.
As the collapse of Monarch and Air Berlin has shown, that’s not healthy for customers or the industry. Which is why Bjorn Kjos will most likely say yes when Willie Walsh comes courting for a third time.
Results from HSBC for the first three months of the year were disappointing. Pre-tax profits were down over the period although John Flint, the new boss, is optimistic the rest of the year will be brighter because of higher interest rates and growth in Asia.
But the most important news was that both Flint and the results were dull and for the first time in years, there were no scandals to reveal.
After years of having to admit to money laundering for Mexican drug cartels, rigged currency transactions and harbouring Swiss tax exiles, which has cost it billions in money and reputation, that was a relief.
Boring banking is the way to go. A banker saying no be should the equivalent of a doctor taking the Hippocratic Oath.