Earlier this month, we wrote about Icelandair’s plans to buy WOW Air, a budget Icelandic airline that’s been offering ridiculously cheap tickets (like, $99 cheap) across the Atlantic since 2012. At the time, the deal seemed all but certain: Icelandair Group‘s shareholders still had to sign off, as did an official body called the Icelandic Competition Authority, but WOW Air CEO Skúli Mogensen went so far as to tell employees in an email that the deal would be settled in about three weeks. Now? That deal is dead, according to Icelandic paper Fréttablaðið, which reports that the agreement was axed after neither airline could come to an agreement on purchase conditions.
Here’s what you need to know right now:
Why is this bad news?
WOW Air is rapidly losing money and cutting routes, and a purchase by Icelandair would have rescued the airline and no doubt brought its in-flight food, drinks, and entertainment up to par with Icelandair’s. It would have also allowed the Icelandair Group to funnel money into Icelandair’s global expansion and develop it as a more competitive premium airline, building out its business class and in-flight amenities. The deal falling through hurts both parties, but it’s definitely worse for WOW Air.
What does WOW Air have to say about all of this?
Mogensen said: “It was clear at the outset that it was an ambitious task to complete all the conditions of the share purchase agreement in this short period. We thank the Icelandair Group’s management team for this challenging project, and also wish the management and staff of Icelandair Group all the best.”
“The planned acquisition of Icelandair Group of Wow air will not go through,” said Bogi Nils Bogason, Interim President and CEO of Icelandair Group. “The Board of Directors and management of both companies have worked on this project in earnest. This conclusion is certainly disappointing. We want to thank WOW Air‘s management for a good cooperation in the project during recent weeks. All our best wishes go out to the owners and staff of the Wow Air.”
What’s the latest on WOW Air, then? Is my flight canceled?
Nope. The airline announced earlier this week that it would shrink its fleet size by returning two Airbus A320 narrowbody jets and two Airbus A330 widebody jets, leaving it with 16 planes, reports USA Today. It’s also toying with cutting service to certain U.S. cities, though Anna Romano, a U.S.-based spokeswoman for the carrier, told the paper that the “winter schedule is currently under re-evaluation due to changes in WOW Air’s fleet, but nothing has been finalized.” (By our calculations, the airline currently only has four year-round U.S. destinations: Baltimore, Boston, Chicago, and New York-Newark.)
In Iceland, the biggest news is that employees of the cash-crunched airline will get paid on Friday, contrary to popular reports, and that everything will continue as normal—for now, at least.
What does this mean in the long-term?
Mogensen admitted the company’s Q4 results are “materially worse than originally anticipated,” which doesn’t bode well for the airline. It has struggled to be profitable with its catchy $99 fares to Europe amid rising fuel costs. (It has also been plagued by flight delays and cancellations, and allegations of poor customer service, all of which have hurt its image.) Should WOW Air declare bankruptcy, it wouldn’t be the first low-cost airline to bite the dust in recent years: Primera Air abruptly stopped flying in October after five years in business, and in October 2017, the collapse of U.K.-based Monarch Airlines led to 110,000 passengers being stranded.
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