Norwegian snubs bid from British Airways owner

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Norwegian Air Shuttle, the fast-expanding budget airline, says it has unanimously rejected two bid offers from the owner of British Airways.

International Airlines Group (IAG), which owns 4.6% of Norwegian, is seeking to lift its market share amid competition from low-cost carriers.

But Norwegian said the proposals undervalued the firm and its prospects.

Shares in Norwegian initially fell as much as 10% on the news before recovering slightly.

By contrast, IAG was the top gainer on London’s FTSE 100, up 5.6%.

News of the bids first emerged in an investor presentation by IAG, which also owns Spanish airline Iberia.

IAG was giving the presentation after it posted a big jump in operating profits for the first quarter of 2018, thanks in part to strong demand over Easter.

Underlying earnings were €280m (£247m) before exceptional items – up from €160m last year. Revenue climbed 2.1% to €5bn.

IAG said it had “had contact with the Norwegian board regarding a possible offer, without reaching agreement”.

In response, Norwegian issued a statement confirming that it had received “two separate conditional proposals” from IAG offering to buy the entire company.

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Norwegian Air has earned a name for its low-cost deals, such as £99 one-way flights from Edinburgh and Dublin to New York.

However, it reported a net loss in 2017 and had to raise fresh funds earlier this year to cope with its rapid expansion and higher fuel costs.

Nevertheless, its move into discount intercontinental flights has shaken up the market and forced bigger rivals such as IAG and Air France to take measures to win back customers.

IAG has already put a toe in the budget long-haul market with Level from Barcelona, while adding European airport slots from failed UK airline Monarch.