Norwegian Air rejects two separate approaches from IAG

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Low-priced airline Norwegian has rejected two takeover offers from the owners of British Airways.

IAG's move for Norwegian came after Norwegian had to issue new shares in March to try to shore up its balance sheet and help it weather higher costs and deepening losses as it gambles on a huge expansion of its low-priced long-haul business.

IAG's share price had opened at 2.9 per cent in early trading but climbed to 3.6 per cent after the announcement.

"These proposals were reviewed in conjunction with financial and legal advisers, and were unanimously rejected on the basis that they undervalued NAS and its prospects", Norwegian said in a statement.

It saw operating profit in the three months to March 31 rise 75% to 280 million euro (£247 million), traditionally the weakest quarter of the year for airlines.

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The chief executive of British Airways-owner IAG declined to answer questions about takeover target Norwegian on the group's quarterly earnings call on Friday.

Releasing first quarter results on Friday, IAG stuck to a forecast for annual profit growth after announcing a 75 per cent jump in quarterly profit, in results that showed it was striding ahead of rival Air France-KLM.

"Our positive passenger unit revenue trend continued with an increase of 3.5 percent at constant currency". The British Airways parent disclosed that it had benefitted from favourable currency movements of €58 million, which helped offset higher fuel unit costs.

Shares (Berlin: DI6.BE - news) in Norwegian fell 12 percent on Friday following the news it had rejected IAG's proposals.

'This trend benefited partially from the timing of Easter. IAG said it was now "evaluating" its possibilities regarding an attempted acquisition of Norwegian. IAG had acquired a 4.6 per cent stake in struggling Norwegian in April with a view to starting takeover discussions. The improving market presents a benign background to IAG's possible bid for Norwegian Air.

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