IAG's interest in Norwegian Air was unexpected, but also not surprising. From nothing five years ago, Norwegian has built a 5% seat share on the North Atlantic, IAG's biggest long haul market. In response, IAG established Level, but an acquisition could rapidly accelerate its long haul low cost ambitions. It would extend IAG's leadership of the North Atlantic and make it Europe's biggest airline group overall.
Norwegian is a long haul low cost pioneer, but IAG will be wary of Norwegian's two annual losses in the four full years since it launched long haul operations, and its growing debt burden. IAG may also be wary of Norwegian's increasingly unfocused business model, encompassing European short haul, trans-Atlantic and Europe-Asia long haul, a new Argentine domestic airline and aircraft leasing.
Nevertheless, IAG says its 4.61% stake in Norwegian is "an attractive investment, …intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer". Norwegian said that it had not been in contact with IAG about this, but added that "interest from one of the largest international aviation groups demonstrates the sustainability and potential of our business model and global growth."
Norwegian meanwhile appears coyly to have taken up the invitation to tango with IAG. Let the fun begin.