British Airways owner International Airlines Group (IAG) is considering making a takeover offer for embattled low-cost rival Norwegian Air Shuttle.

The airline acquired a 4.61% stake in the firm to kick-start discussions with Norwegian Air, which it believes is an ‘attractive investment.’ The latter’s strategy has been to try and apply a low-cost model to long haul routes.

International Airlines’ interest in Norwegian Air could be seen as opportunistic after the latter airline became a victim of its exceptionally fast growth, with costs escalating just as fast.

At the end of 2017, Norwegian Air reported operating losses of approximately NOK2bn, down from an operating profit of NOK1.8bn in 2016.

Davy Research analyst Ross Harvey argues 2018 is an important year for Norwegian Air as it needs to get costs under control, whatever the outcome of the potential bid situation.

Over the last 12 months, the airline sector has experienced significant turbulence with Monarch and Air Berlin buckling under the pressure of a price war, intense competition and higher oil prices. (LMJ)

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