There’s been a lot of news about WOW air recently, so it’s useful to summarise where the airline is, specifically with regard to funding.
WOW air was founded by Skuli Mogensen in 2011. In recent years it engaged in an aggressive expansion to capture connecting traffic between North America and Europe, with the ambition to be the “Dubai of the North Atlantic”. Passengers have increased five fold over the past three years to reach an estimated 3.6 million this year.
It was catching up Icelandair in terms of market share at Keflavik airport and had ambitions to overtake it next year. However, this had all come at a cost. Aggressive fare competition and expansion had hit its yields. It has no fuel hedging strategy and so was exposed to rises in fuel prices. A plan to raise $200-300m in an Initial Public Offering has been abandoned. This has not escaped the attention of WOW air’s suppliers which have been demanding tighter credit terms, placing considerable pressure on the airline.
Earlier this month, Icelandair announced it was to buy WOW air in all share transaction which valued WOW air at around $18m.
This was subject to the approval of Icelandair shareholders, which was due to happen at the end of this month. Both Icelandair and WOW air have confirmed that the necessary approvals could not be obtained in time and the acquisition has been abandoned.
It has to be said there were aspects of the merger that didn’t make sense, namely maintaining separate brands when there was significant network overlap and the lack of scope for synergies given Icelandair operates Boeing aircraft and WOW air operates Airbus aircraft.
Indigo Partners Investment
WOW air has announced late Thursday 29 November that it has reached an agreement in principle for an investment from private equity firm Indigo Partners LLC.
The terms of the investment have not been disclosed. This is also subject to the completion of due diligence.
Update: WOW air published its financial results for the 9 months to 30 September 2018 late on Friday 30 November. It reported a loss of $33.6 million for the period. The airline confirmed its ability to continue to trade as a going concern is dependent on it raising additional capital.
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