Norwegian Air’s major owners and management are already facing turbulence over a pending takeover bid. Now they need to deal with new problems tied to the airline’s fleet of Boeing 787 Dreamliner aircraft that may cause more delays and cancellations for Norwegian Air passengers.
Rolls-Royce, producer of the Dreamliner motors on more than half of Norwegian’s fleet of the long-haul aircraft, announced just before the weekend that even more frequent checks and repairs are needed. Rolls-Royce’s so-called Trent 1000 Package C motors have been troublesome, reported newspaper Dagens Næringsliv (DN), because they require so much maintenance tied to wear and tear that’s now more serious than earlier though.
“Unfortunately this will lead to further disruptions for our customers,” stated Rolls-Royce in a press release on Friday. Norwegian Air is one of Boeing’s biggest customers, with few if any alternative aircraft available when things go wrong.
“We’re disappointed with Rolls-Royce and Boeing,” Norwegian Air spokesman Lasse Sandaker-Nielsen told DN. “Along with other airlines that have Boeing 787 Dreamliners with Rolls-Royce’s Trent 1000 Package C motors, Norwegian will also have to carry out inspections.” He said the problems will affect motors on 15 of the 27 Dreamliners in Norwegian’s fleet, and that inspections were already underway, affecting service on its route from Paris-Orly to New York.
Share price still rising
Norwegian’s stock, meanwhile, kept rising on Monday after the parent of British Airways (IAG) revealed late last week that it had acquired 4.6 percent of Norwegian’s stock and was evaluating a bid to take over all of it. Shares in Norwegian Air Shuttle were trading at NOK 289 heading into late afternoon, up 9 percent since Friday’s close and 65 percent during the past week.
DN reported on Monday that one analyst in Norway who follows Norwegian Air closely, Lars-Daniel Westby at Sparebank 1 Markets, thinks IAG will soon flag that it’s acquired more than 5 percent of Norwegian shares, and will probably be willing to pay between NOK 310 and NOK 485 for the rest of them.
“We think IAG will buy up to 10 percent before they start negotiations with a goal of buying 100 percent,” Westby wrote in a portfolio update. He noted that Norwegian has financial and operations challenges, while IAG has financial capacity, synergies and recently carried out a restructuring of another airline it controls, Vueling in Spain.
He doesn’t predict there will be any cooperation between Norwegian and IAG, nor that other bidders will come along. It remains up to Norwegian’s founder and CEO Bjørn Kjos, who controls the airline at present, and his fellow investor friends whether they’ll sell, but several of them are already past retirement age and Norwegian’s stock, adjusted for new issues, has never traded above NOK 302 per share, according to DN.
Even though Norwegian’s share price has soared since IAG’s announcement, the market now seems to be valuing it at less than NOK 300. A 30 percent premium would seem reasonable, Westby thinks, adding that IAG has received a response to its invitation from the market after probably planning a takeover bid for quite some time.