EasyJet was up 2%, Ryanair up 1.7% Wizz Air 3% after IAG confirmed its position with Norwegian, however.
The purchase of Norwegian would benefit IAG's British Airways gain a bigger share of the low-priced market. It added Aer Lingus and the Spanish budget airline Vueling to its portfolio in 2015.
In its communiqué, IAG points out that "Norwegian is an attractive investment" and announces that it has acquired a "minority investment" of 4.61% in that company, "destined to establish a position from which to start conversations with Norwegian, Including possibility of formulating an offer of acquisition on whole "of airline". It would also put IAG into the pole position in the long-haul, low-priced market, for which Norwegian has been building a large base at London-Gatwick airport.
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Shares in the struggling budget airline jumped 37pc following initial reports of IAG's approach, with the company now valued at $1.22bn (€1bn).
Shares in Norwegian, a stock which this year has been pounded over worries about its profitability, surged 37% on the news.
The company last month raised $168m (€136m) in a share sale after warning of a larger than expected first-quarter loss.
'Norwegian believes that interest from one of the largest worldwide aviation groups demonstrates the sustainability and potential of our business model and global growth, ' it said.
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The airline said it had no prior knowledge of IAG's actions, but welcomed the investment.
Ryanair last month agreed to buy a majority stake in a new Austrian leisure airline founded by Formula One former champion Niki Lauda, while easyJet bought a parts of failed airline Air Berlin previous year.
London-listed International Airlines Group (IAG) revealed the news in a brief statement in which it noted press speculation over a possible bid for Europe's third largest low-priced carrier after Ryanair and Easyjet.
IAG's interest in Norwegian would see a wave of consolidation in European air travel which started previous year extend its reach to long-haul travel.
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