Business Irish

Tuesday 17 September 2019

Walsh could bail on deal as he plays hard ball with Norwegian

Air France-KLM CEO Jean-Marc Janaillac to quit airline. Photo: Reuters
Air France-KLM CEO Jean-Marc Janaillac to quit airline. Photo: Reuters
Donal O'Donovan

Donal O'Donovan

IAG could ditch its stake in low-cost operator Norwegian Air Shuttle if takeover talks don't progress, Willie Walsh told the Irish Independent.

The airline group chief was speaking after Norwegian said it had rebuffed takeover proposals from IAG because they undervalued the carrier.

There are currently no talks with Norwegian under way, Willie Walsh said. IAG is under no "put up or shut up" obligation to come back with a formal bid, he added.

Shares in Norwegian traded down as much as 12pc yesterday, as it became clear no firm offer from IAG was forthcoming. IAG shares rose 5pc.

Norwegian said it had received two conditional proposals for a full takeover from IAG, but had rejected them because they undervalued the company.

Aer Lingus owner IAG is now "considering all" options on how to proceed, Willie Walsh told this newspaper.

That could mean coming back with a formal takeover approach for Norwegian, exiting the company altogether or - to hedge IAG's bets - retaining the 4.61pc stake it took in Norwegian shares in April as an investment.

The potential bid situation, and signs of apparent tension between IAG and Norwegian, dominated financial results from IAG yesterday.

Those results had confirmed IAG's position as one of Europe's strongest airline groups with a 75pc jump in quarterly profit to €280m, beating forecasts, and said its earnings are set to increase for 2018 as a whole.

Willie Walsh said it means the business is positioned to grow either through acquisition or organically. "With €7.4bn in cash we're clearly in a very strong position," he said.

This year's spike in oil prices will pile pressure on some of IAG's less financially robust rivals, he said. IAG has hedged 70pc of its oil needs, he said.

"I do believe there are airlines that will find this year more challenging. Fuel prices are much higher than we thought they'd be. I'm pleased we've hedged."

Airlines that will now be hit with the full impact of rising oil costs will be squeezed over the summer, because they won't be in a position to lift prices to compensate for rising cost, he said. If airlines fall by the wayside IAG can shift capacity into affected markets, or swoop on a takeover, Mr Walsh said.

Meanwhile, Air France-KLM CEO Jean-Marc Janaillac said yesterday he would resign after staff rejected a pay deal, plunging the airline into turmoil amid a wave of strikes at its French brand that has cost the company €300m.

He said more than half of the staff at Air France who cast a ballot voted against the offer of a 7pc rise over four years. "I take responsibility for the consequences of this vote and will in the coming days tender my resignation to the boards of Air France and Air France-KLM," he told a news conference.

Irish Independent

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