The recent collapse of WOW Air is predicted to send the Icelandic economy into a tailspin. But airBaltic’s recent maneuvers may just nudge the Nordic coffers back to the straight-and-level.
WOW’s sudden collapse in March of this year sent shock waves through the country’s already fragile economy. Within a week, the Central Bank of Iceland forecasted a sharp rise in inflation and a 3% drop in GDP.
Unemployment was also forecast to rise 0.8% more than pre-collapse predictions, writes Ragnhildur Sigurdardottir for Bloomberg.
Unquestionably, WOW’s collapse injured an economy already beleaguered by poor fishing revenue. The carrier’s sudden departure now promised an unwanted slump in tourism. The island nation had relied on WOW as well as flag carrier Icelandair for their proven ability to attract visitors.
However, a degree of hope for the island may come from airBaltic’s recent announcement of additional flights to Reykjavik (Keflavik) airport.
Founded in 2011, WOW grew fast. It offered cheap flights between Europe and the United States by way of a connection at Reykjavik. Last year, it was the second biggest low-cost carrier on transatlantic routes after Norwegian.
WOW also sold one third of all seats on flights to and from Iceland.
WOW’s rapid rise to success in the early days even attracted a takeover offer from Icelandair. But, in the long run, a simple change in the price of jet fuel prevented the airline from being profitable. By the end of 2018 Icelandair’s plans for acquisition had been abandoned due to concerns about the financial viability of a company that was by then clearly cash-strapped.
The privately-owned airline posted a pre-tax loss of almost $42 million for the first nine months of 2018, according to Phys.Org.
The loss of WOW was therefore not entirely unexpected. And the hole it leaves looks set to be filled, at least for now, by Latvian flag carrier airBaltic.
The Air Baltic Corporation is based at Rīga International Airport. It has two other bases in Tallinn and Vilnius. The airline’s network connects Europe, the Commonwealth of Independent States and the Middle East.
In April Latvian broadcaster LSM.LV revealed that airBaltic will offer three weekly flights on the Rīga to Reykjavik route from 3rd June until 26th August. Martin Gauss, CEO of airBaltic said that passenger demand had been steadily increasing year on year for the last three summer seasons. He hinted that such a trend was set to continue, saying that,
‘Thanks to the additional frequency and the larger capacity of state-of-the-art Airbus A220-300, we will offer 29% more seats on sale this summer,’
AirBaltic also announced new summer routes to Dublin, Stuttgart and Menorca.
The WOW woes
WOW was until last year the second largest Icelandic carrier following its acquisition of Iceland Express in 2012. But as with other defunct low cost providers, the airline had struggled to meet its financial obligations due to a rise in the cost of avgas and stiff competition from other carriers.
In the wake of WOW’s collapse Iceland’s government has hinted that it may intervene to halt a downturn of the economy.
Prime Minister Katrín Jakobsdóttir has attempted in the last few years to rebuild the strength of the nation’s finances. She hoped bolstering the coffers would prove useful in the event of further misfortune.
AirBaltics’ augmented services to the country’s main airport may just help things along.