Back toward the end of March, WOW Air cancelled all flights. The Icelandic low-cost carrier, competing against Icelandair, had been struggling to make ends meet for months when, finally, it had to shut shop. However, with WOW Air making up almost 30% of Icelandic flight market, its loss hasn’t gone unnoticed. In fact, it’s having a significant impact on the Icelandic economy.
Iceland is an ocean-locked island in the North Atlantic. The island largely relies on the tourist trade to keep its economy running. However, with 30% of the flights gone overnight, the economy has begun to suffer as the number of tourists has dropped.
WOW Air’s demise started back last year when founder and CEO Skuli Mogensen was forced to take drastic measures, including a large injection of personal cash. This, however, wasn’t enough, and the airline began to look for bidders. The first interested party was the direct competitor Icelandair. However, as criteria weren’t met, the bid fell through.
Next in line was the Indigo Partners group. Indigo Partners owns Frontier, Volaris, Wizz Air, and Jet Smart. This deal was on the table for a lot longer than the Icelandair proposal, however eventually this also fell through. Bidding was briefly passed back to Icelandair just before the eventual, yet anticipated, collapse of the airline.
On March 28th the airline finally crumbled. Announcing their bankruptcy, WOW Air simultaneously cancelled all future flights. The action left hundreds of passengers stranded around the globe. Thankfully, other airlines picked up the slack, but only to repatriate already stranded passengers.
According to CAPA, WOW Air accounted for almost a third of all of the seats available to Iceland in 2018, at 31.3%. While many of the passengers were using Reykjavik as a place to connect, a significant portion of travellers whose final destination was Iceland were also using WOW Air.
Icelandair accounted for 47.1% of the seats to Iceland. As a result, other airlines accounted for the remaining 21.6%. When WOW was in business, there were just over 12,000,000 seats available to Iceland. Now they are gone, this has dropped to around 8,400,000 seats.
Iceland Economy takes a hit
According to Bloomberg, the loss of WOW Air has dealt a serious blow to the Icelandic economy. The Central Bank of Iceland had predicted that the economy would grow by 1.8% before the airline folded. This has now been revised to a decrease of 0.4%.
The airline’s collapse has also had an effect on Iceland’s employment rate. While the airline only employed around 1,000 members of staff, it indirectly led to a number of others employment opportunities. People needed to staff the airport, which is expecting a drop in passenger numbers of almost one million. Additionally, with fewer people occupying hotels, fewer people are needed to clean rooms.
The Central Bank of Iceland told Bloomberg: “Although the economic contraction will be challenging for households and businesses, the economy is much more resilient than before. Furthermore, monetary policy has considerable scope to respond to the contraction”
Have you been affected by the collapse of WOW Air? Let us know in the comments!