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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.
Icelandair Acquisition
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.
Aircraft Reductions
WOW air has confirmed it has returned two Airbus A320 and two Airbus A330 aircraft to lessors.
Route Suspensions
WOW air has suspended a number of US routes, some very shortly after launch:
Cincinnati – Suspended on 26 October 2018 after launching on 9 May 2018.
Cleveland – Suspended on 25 October 2018 after launching on 3 May 2018.
Dallas Fort Worth – Suspended on 26 October 2018 after launching on 23 May 2018.
New York JFK – Suspended on 26 October 2018 after launching on 26 April 2018.
Pittsburgh – This has been taken off sale from 11 January 2019.
St Louis – Suspended on 6 January 2019 after launching on 19 May 2018.
Frequencies have also been cut to Los Angeles and Orlando. San Francisco has been suspended for the winter and is currently scheduled to return on 6 May 2019.
Advice for passengers
Speculating about the health of airlines can be a self-fulfilling prophecy.
However, by WOW air’s own admission, questions of its future have affected confidence in the airline. The same sound advice, namely always using a credit card and having travel insurance, applies to any airline booking.
Typical of these fly-by-night budget airlines. I’ll stick with the legacy carriers, they you very much. They aren’t going anywhere.