Is IAG’s interest in Norwegian Air in the best interests of its passengers?

International Airline Group, the holding company behind British Airways and Iberia, is rumoured to be considering using its recently acquired 4.6 per cent stake in Norwegian Air Shuttle as a springboard for a potential takeover of the group.

Norwegian (the trading name of Norwegian Air Shuttle) is Norway’s low-cost airline that has quickly expanded from its original home and local markets of Norway and Scandinavia, to provide long haul routes to the US, Middle East and Africa, and is imminently launching flights to Asia. The company’s growth, whilst rapid, has not yet reaped rewards for its shareholders, with Norwegian not being as profitable as other low-cost airlines such as Ryanair. However, its reputation for cheap fares, both long- and short-haul, and its new long-haul fleet, has seen it become a popular choice for long-haul passengers at the UK’s Gatwick airport, outside of its original base in Scandinavia.

If IAG were to pursue a full takeover of Norwegian, this would see it expand in to the area of low-cost long-haul flights for the first time, a decision that might baffle its frequent flyers and independent shareholders given British Airways seems unable to decide whether it genuinely does want to be a low-cost airline (as demonstrated by the introduction of hand baggage only fares and paid for inflight food) or whether it wants to retain its status as a premium airline for business class passengers. An airline can’t be all things to all people and should IAG pursue this acquisition, its flight path is clearly indicated.