British Airways Owner Is Said to Consider Bid for Norwegian Air

(Bloomberg) -- IAG SA is considering a bid for Norwegian Air Shuttle ASA, people with knowledge of the matter said, in a potential deal that would help the owner of British Airways boost its market share amid increasing competition from low-cost carriers.

A potential deal could value the Norwegian company, which has a market value of about $950 million, at about $3 billion including debt, the people said, asking not to be identified because the deliberations are confidential. The company may still decide against a bid, they said.

Representatives for IAG and Norwegian Air declined to comment.

Adding Norwegian would jolt IAG’s foray into low-cost, long-haul service into hyperdrive. The owner of British Airways has already expanded its discount Level and Aer Lingus long-haul divisions, while adding European airport slots from failed U.K. rival Monarch Airlines. In February, IAG predicted higher earnings this year as prices gain, costs fall and the group expands capacity for Level.

“Everybody in Europe wanted to buy us,” Norwegian Air CEO Bjorn Kjos said in an interview this month. But the company has been investing in its aircraft, and he wouldn’t consider selling the business until the investments start paying out, he said. “If you decide to sell, that is when you take in other investors, but that has not been on our agenda at all.”

Shares of Norwegian Air have jumped about 10 percent this week, erasing some of last year’s 39 percent rout and boosting its market value to about 7.4 billion kroner ($950 million).

The European airline industry is poised for a further round of consolidation. Alitalia SpA has attracted interest from a host of European rivals including budget carrier EasyJet Plc and Deutsche Lufthansa AG as part of a government-led rescue effort. That comes on top of EasyJet’s successful bid for defunct Air Berlin’s operations at Tegel Airport. Meanwhile, SAS AB, the Nordic region’s biggest network airline, plans to standardize its fleet to cut costs as it positions itself for an industry shakeup.

Norwegian Air’s aggressive foray into low-cost intercontinental flights has disrupted the market and forced bigger industry players like British Airways and Air France to take measures to woo travelers. But the company’s finances have been stretched, prompting Norwegian to take steps to raise or preserve cash -- including selling some of its brand-new planes.

--With assistance from Richard Weiss Benjamin Katz and Angela Cullen

To contact the reporters on this story: Manuel Baigorri in London at mbaigorri@bloomberg.net, Dinesh Nair in London at dnair5@bloomberg.net.

To contact the editors responsible for this story: Dinesh Nair at dnair5@bloomberg.net, Chitra Somayaji, Anthony Palazzo

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