The CEO of airline group IAG is hinting there is still a chance it could buy low-cost long-haul rival Norwegian.
Speaking after IAG’s third quarter results, Wille Walsh said although there was nothing new to report, IAG would likely retain a minority shareholding in the airline until around August 2019, which it would then sell if it could not agree a deal.
“It’s not going to continue forever…if we haven’t concluded arrangements by, certainly, by August of next year, and probably before, we won’t have those shares,” Walsh said.
The fact that IAG has kept its small stake, and with Walsh still talking about a potential deal, means that an acquisition is still a real possibility.
Another factor is Norwegian’s potential billion dollar cash injection on the back of a joint venture deal. The carrier said it was in advanced talks with an un-named partner yesterday, and an improved balance sheet would certainly make it a more attractive target.
Speaking about the potential joint venture, Walsh said it had not come as a shock.
“We had anticipated that they would do something in relation to the fleet. We know that a number of the lessors have been interested in the Norwegian fleet. So no surprise there. I see it as a positive for Norwegian, but it’s not a surprise to us. It was something that we had anticipated and expected,” Walsh said.
IAG, which owns British Airways, continues to be fairly relaxed about the UK’s impending departure from the European Union. If the UK leaves without securing any kind of deal, flights would likely be disrupted but Walsh is confident both sides will come to their senses.
“We continue to believe that and strongly believe that the arrangements post-Brexit will facilitate the continuing operation of the airline industry as we know it. And we’re fully expecting a comprehensive agreement to be reached between the U.K. and in the EU,” Walsh said.
“If there isn’t, you’ve heard of the language being used by both parties that they would expect the bare-bones agreement to apply, which I think will be sufficient for most.”
An area of slight Brexit concern for IAG is a recently announced investigation into its transatlantic joint venture with American Airlines and others.
The UK’s antitrust regulator is taking a closer look at the alliance in preparation for its expanded post Brexit role. While the UK is a member of the European Union, competition regulation is a matter for the European Commission.
“Other competition regulators that have reviewed this have clearly seen the consumer benefits from the transatlantic joint business, and that continues to be the case. So we’re very clear that consumers have had significant benefit as a result of the transatlantic joint venture,” Walsh said.
Third Quarter Results
IAG reported an 8.5 percent rise in revenue to $8.1 billion (€7.1 billion.) Pre-tax profit increased 12 percent to $1.6 billion (€1.4 billion.)
The three month period ending Sept. 30 is usually the strongest for European airlines as it coincides with the summer months.
The company raised its full-year operating profit guidance by $227 million (€200 million) to $3.6 billion (€3.15 billion.) The only dark clouds for the company are increasing fuel and foreign exchange costs.
“Higher fuel costs are becoming more evident, with IAG’s hedging now at less favorable rates,” said Gerald Khoo, an analysts at stockbroker Liberum Capital.
Photo Credit: British Airways short-haul aircraft. The airline’s parent company reported a rise in profit. British Airways