“There’s a new wave of consolidation approaching.” – Karsten Spohr.
After weeks of rumors, and days of stalemate – it appears the IAG Group bid for Norwegian is nowhere near it’s final days. Casten Spohr, Lufthansa’s charismatic CEO has thrust the Lufthansa Group into the discussion, adding unprecedented drama to the European aviation scene. With the failure of Airberlin, the rise of fuel prices and increasingly price conscious consumers, Norwegian has carved out unique territory in the marketplace and the bidding war now appears to be on.
Norwegian is famous for cheap, and consumers love a deal. Somewhere in the vicinity of 98% of non corporate travel is booked on price alone, and Norwegian have captivated the public with £99 round trip flights to America and flash sales all over the globe. Recent expansion into bread and butter routes for legacy carriers, such as London to Singapore and Stockholm to Dubai have made instant impact on flight pricing and this sort of approach can be extremely disruptive to legacy airline bottom lines.
Carsten Spohr is shaking things up at Lufthansa, aiming to add digital agencies and revolutionize the major airline machine. He’s now brought Lufthansa to the forefront of Norwegian takeover discussions, telling the world that an era of European airline consolidation is coming, and that the Lufthansa group is indeed in talks with Norwegian. No specific bid has been announced as of yet, but a full and keen interest on a Norwegian acquisition is unquestionable.
IAG bought a 4.6% stake in Norwegian in a clever April play. Since then, attempts to acquire larger ownership percentages have fallen on uninterested ears, with Norwegian refusing not one but two separate offers from the IAG Group. IAG Group is the parent company of British Airways, Iberia and AerLingus. There’s no question a controlling stake in Norwegian would put IAG in the drivers seat of European aviation. The question is: how much is the mercurial Willie Walsh willing to pay to twist the screws?
This is just fascinating on so many levels. Norwegian is hemorrhaging cash at unprecedented levels to continue their onslaught on traditional legacy airlines, and there’s no doubt they’ll need to sell to survive – at some point. But as long as Norwegian remains funded, they’re the spoiler of every party. Whichever airline wins a takeover bid will have an attack dog in the pen, ready to aggressively attack any competitors route. It’s a fight some say neither airline group can afford to lose.
Outcome: IAG cementing their stranglehold over London departures and expanding their poor profiteering services further downgrading the experience to BA levels of failure.
There is form on this one from th ’80’s and ’90’s; Laker SkyTrain followed by Virgin dirty tricks campaign, it’s clear how BA (now IAG) respond when their virtual monopoly is challenged and they face real competition.
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