BA-owner IAG beats forecasts but sees Norwegian bids rejected

05 May, 2018, 03:39 | Author: Brooke Harris
  • BA-owner IAG beats forecasts but sees Norwegian bids rejected

Low-priced airline Norwegian Air Shuttle ASA rejected two takeover proposals from IAG SA because they undervalued the carrier, and the suitor said it's considering options on how to proceed.

IAG shares jumped 3.3 percent to 661.4 pence, after the owner also of Spanish carrier Iberia reported a 75-percent jump in operating profits for the first quarter.

Revenue grew 2% to €5bn (£4.4bn) as the group partly benefited from the timing of Easter.

The improved earnings and reduced costs at IAG contrast with rival Air France-KLM (AIRF.PA), which on Friday reined in profit and growth expectations for this year due to an ongoing series of costly strikes at its main Air France brand.

First quarter passenger unit revenue, which is measured by available seat per kilometre, was EUR4.41 billion, up 3.4% from EUR4.27 billion the prior year.

Salmon added the most impressive aspect of the results was IAG's tighter grip on controllable costs.

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In a statement IAG said: 'IAG confirms that it has had contact with the Norwegian board regarding a possible offer, without reaching an agreement.

Of course, soaring oil prices mean higher fuel costs, although the 4.7% increase is encouraging given that Brent crude oil is up 8.1% per barrel since January.

"Total operating costs actually fell year-on-year, despite headwinds from higher fuel costs and flying nearly 3 billion extra kilometres".

Last month, International Airlines Group said it acquired 4.61 per cent of Norwegian Air "to establish a position from which to initiate discussions, including the possibility of a full offer for Norwegian".

On Thursday, IAG's majority shareholder Middle East carrier Qatar Airways said it would be supportive of a deal. Norwegian said in a statement that it "has received two separate conditional proposals from IAG Group in relation to an acquisition of 100 per cent of the share capital of NAS [Norwegian Air Shuttle, the airline's holding company name]". The airline has recently made moves the discount flights arena which has forced larger competitors to respond.

IAG's moves came after Norwegian had to issue new shares in March to try to shore up its balance sheet and help it weather higher costs and deepening losses as it gambles on a huge expansion of its low-priced long-haul business.

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