So why did IAG acquire 4.6 percent of norwegian earlier this year.
Building a stake from which to launch a takeover bid. To say that part of the business model has always been to buy airframes in order to sell them off is to admit that the senior management have been adopting a ludicrously high risk strategy based on future asset values in a notoriously volatile industry - a strategy which would be unnecessary for a company which was generating a sufficient margin from its operational activities.
The the only reason Norwegian stands is because there are investors who choose to divert capital from successful economic activities into it, a marginally (at best) performing business enterprise. Things may improve over time but no rational investor looking at Norwegian’s financial results over the past few years could come to the conclusion that this is a business which is going to perform consistently well in the short term. Indeed when you look at the share price performance the most significant positive change in the last three years has occurred when a successful enterprise was contemplating a takeover (ie providing better security for Norwegian’s debts). Apart from that the share price trajectory has been steadily negative.
It is a good product which Norwegian offer but the cost of providing the product is greater than customers are willing to pay for it. To put it differently: Norwegian either have to provide the same product at lower cost or somehow convince more customers to part with more money for the product they provide. In any case, if they wish to survive in the long run they need to change, the current business model is underperforming.
