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Future of Iceland’s Ultra-Low-Cost WOW Air Looks Uncertain as Rescue Bid Falls Through

Future of Iceland’s Ultra-Low-Cost WOW Air Looks Uncertain as Rescue Bid Falls Through

Future of Iceland's Ultra-Low-Cost Airline WOW Air Looking Uncertain as Rescue Bid Falls Through

The ultra-low-cost Icelandic airline WOW Air is sitting on the precipice of collapse tonight after talks on a rescue bid with the owner of Denver-based Frontier Airlines fell through.  WOW Air has been in talks with Indigo Partners, which is a private equity firm that also owns stakes in Volaris and JetSmart, since late November 2018 after the struggling airline called off a separate deal with rival Icelandair.

Indigo Partners looked set to take a controlling stake in WOW Air after a preliminary agreement was reached late last year but neither side provided detail on why the deal eventually fell through.  Instead, WOW Air says it has now gone back to Icelandair and hopes to conclude a takeover deal within the next four days.

WOW Air had used its strategic location between Europe and North America to open up a number of ultra-low-cost routes between the two continents.  Founded in 2011 by tech entrepreneur Skúli Mogensen, the airline used an all Airbus fleet to rapidly expand its presence in the United States including some rather unusual destinations such as Cincinnati and Cleveland.

As recently as late last year, WOW Air was talking about expanding its route network to destinations as far-flung as Dehli but those plans have long been forgotten.  The airline has already reduced its fleet of aircraft from 20 to 11 aircraft – offloading its wide-body Airbus A330 aircraft and even selling off some Airbus A321’s.  More than 100 staffers were made redundant just before the end of the year.

In the first nine months of 2018, the airline reported a loss of USD $33.6 million on the back of revenues of just $501 million.  WOW has failed to file its full end of year financial results for 2018.  The partnership with Indigo Partners was meant to allow the airline to go back to its roots but its very future now looks to be in doubt.

WOW Air has faced incredibly stiff competition from both established legacy carriers and rapidly expanding low-cost rivals like Norwegian and IAG low-cost subsidiary LEVEL.  And while Iceland has seen a significant increase in inbound tourism, it’s a saturated and cutthroat market that WOW has failed to monopolise.

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