British Airways Owner IAG Won’t Bid for Norwegian Air

British Airways parent IAG SA said it won’t be making a sweetened bid for ailing rival Norwegian Air Shuttle ASA, sending shares of the discount operator to their biggest drop on record.

London-based IAG “does not intend to make an offer” and will be selling its 3.9 percent stake in due course, it said Thursday. Norwegian slumped as much as 26 percent, while IAG reversed earlier declines to trade higher.

Bjørn Kjos, the Scandinavian carrier’s chief executive officer, previously rejected two offers from IAG as undervaluing the business. The BA owner had responded by saying it wouldn’t engage in a bidding war, though CEO Willie Walsh hinted that he was still interested at an investor day in November, fueling speculation about an improved approach.

IAG’s decision to walk away will spur concerns about Norwegian’s ability to weather a cash crunch after the Fornebu-based company announced last week that it would close some bases and routes as overcapacity squeezes fares across the industry. Walsh may have been put off by those cuts, as well as a profit warning at discount giant Ryanair Holdings Plc and concerns about flights and market developments as Britain prepares to quit the European Union.

Kjos, a former fighter pilot, said in emailed comments Norwegian’s strategy will remain unchanged as it pursues plans to “continue building a sustainable business to the benefit of its customers, employees and shareholders.”

Norwegian has undergone one of the fastest growth spurts in aviation history as it seeks to become a major low-cost player in Europe and extend the model to trans-Atlantic flights, aided by more fuel-efficient wide-body aircraft and newer versions of smaller jets for which the U.S. is now in range.

Concerns about the rise of Norwegian have compelled British Airways to embark on a cost-cutting spree and also prompted IAG to establish its own low-cost, long-haul airline, Level.

IAG bought a 4.6 percent stake in the Nordic carrier last April to facilitate bid talks. The holding has decreased slightly after Norwegian issued more shares.

Source: Bloomberg