Yahoo Finance British Airways owner ready to dump Norwegian stake after takeover talks stall
British Airways’ owner is preparing to dump a stake in low-cost airline Norwegian Air worth tens of millions of pounds after boss Willie Walsh admitted takeover talks were “not going anywhere”.
International Airlines Group (IAG), currently Norwegian’s fifth largest shareholder, bought its stake earlier this year before launching two approaches for the airline. Norwegian rejected the approaches with its enigmatic boss Bjorn Kjos subsequently saying that IAG is “not the only interested party”.
This lunchtime Mr Walsh appear to row back on comments made on BBC Radio earlier in the day that IAG “continued to look at Norwegian”.
“We are not going to keep shares. We are not an investor in Norwegian,” he said. “We bought that small stake to initiate a conversation. But if that conversation doesn’t go anywhere – and it is clearly not going anywhere at the moment – then we won’t hold onto those shares."
IAG has trimmed its original 4.6pc investment in Norwegian and currently owns 3.9pc, worth approximately £39m.
Mr Walsh’s comments came as IAG posted a first-half profit before tax of €1.7bn (£1.5bn), up some 24pc, primarily as a result of a €628m one-off gain from the closure of BA’s final salary pension schemes.
Like its rivals, IAG was not immune to the financial fall-out from the air traffic controller (ATC) strikes that have blighted the sector this year. Spanish budget carrier Vueling had been particularly affected, racking up €20m of disruption costs in the three months months to June.
Although the results were broadly in line with City expectations, IAG shares slipped around 2.2pc. Hargreaves Lansdown equity analyst George Salmon said investors were spooked by the impact of the ATC strikes. Investec analyst Alex Paterson pointed out IAG’s capacity growth for the 2018 had been lowered from 6.8pc to 6.5pc.
Meanwhile, Mr Walsh renewed his criticism of Heathrow Airport. Last week the country’s biggest airport paid its shareholders – led by Spanish infrastructure giant Ferrovial and the Qatar Investment Authority – dividends of £228m, up from £188m, and higher than the £95m in profits generated.
The IAG boss claimed Heathrow was “incentivised to waste money” by a framework with the Civil Aviation Authority (CAA) that links increases to the airport charges with investment.
He said: “I have no problem with a well-run commercial organisation paying dividends to their shareholders, but that’s not Heathrow. Heathrow is a quasi-monopoly that games the economic regulation to maximise the charges they can levy and has done well in the past to convince the regulator to reward them by spending more money.
“We have been very clear with the Government and Heathrow directly, that while we are supportive of expansion it can only be done if the costs are controlled, if airport charges do not increase. And we would expect the CAA as the economic regulator to use its powers to ensure this happens.”
A spokeswoman for Heathrow Airport said: “These claims are entirely baseless – being closely regulated by the CAA means that any investment in the airport is rigorously scrutinised by our own teams, our airlines, independent surveyors and our regulator.
“Significant private investment over the past decade has transformed Heathrow for the better and passengers are voting with their feet. Last year alone, 84pc of the 78 million passengers that chose to fly through Heathrow rated our airport as excellent or good because of the value we deliver with best-ever service levels and lower airport charges.”
