What's going on?

Shares in low-cost carrier Norwegian Air flew up almost 50% on Thursday after International Airlines Group (IAG), the owner of British Airways, announced that it had amassed a 4.6% stake in the airline and was considering a full takeover.

What does this mean?

Norwegian Air has grown rapidly since 2012, doubling the size of its fleet as it strives to become the top European carrier offering low-cost, long-haul flights to North America and Asia. But the company�s finances have begun to fray as the challenge of maintaining loss-leading prices on both long-distance and short-haul routes takes its toll.


Now, amid a wave of consolidation in European aviation, IAG has announced its intention to explore a bid for Norwegian. A deal would see IAG both remove a competitor � its Aer Lingus subsidiary also runs low-cost transatlantic flights � and potentially get hold of Norwegian�s new fuel-efficient jets.

Why should I care?

For markets: Other airline stocks rose in anticipation of a rival going off the market.

Scandinavia�s biggest carrier SAS rose as much as 11% on the news that its low-cost Nordic rival might be packing its bags for the UK, while European low-cost carriers EasyJet and Ryanair each gained around 2%. Of course, the biggest market mover was Norwegian itself; although some are cautioning that IAG may strategically delay its offer and might not match Norwegian�s current first-class valuation.

The bigger picture: Consolidation has been proceeding at a rapid pace in Europe.

That�s thanks especially to fierce competition among low-cost carriers (Ryanair is now Europe�s largest airline by passenger count), which has helped push airlines like Air Berlin and Monarch into bankruptcy. EasyJet and Lufthansa recently mopped up the remnants of Air Berlin, while Alitalia is in talks to be carved up between three major airlines. Ryanair, for its part, is currently in the process of taking over elements of now-defunct Austrian airline Niki.