In October we speculated whether WOW Air might be in financial trouble. The reason behind this thought was the fact that the airline was losing money, and had cancelled a number of US routes.
Now the airline’s position seems to have changed following today’s announcement. Icelandair will, pending the backing of its shareholders, outright purchase WOW Air.
Both airlines will continue to operate as separate brands, however, by owning all of the shares, Icelandair will own its low-cost rival. The news comes after WOW Air had announced plans to go public in the next two years.
WOW Air has traditionally been one of Icelandair’s main rivals. While both of the airlines are based in Iceland, Icelandair has focused on being a full-service carrier, while WOW Air has focused on the low-cost model. As such, Icelandair has been hit by the low-cost airline poaching some customers. As such, Icelandair will have access to the majority of passengers travelling to and from Iceland. At the start of July this year, Icelandair and WOW Air made up a 77% share of the Icelandic aviation market.
More significantly, Iceland is the perfect spot to stop over during transatlantic flights. Both airlines use this to their advantage, meaning that they can offer a multitude of routes. The airlines are able to offer many more routes by including an interchange at their hub.
With an airline like Lufthansa, this could be counterintuitive. Think London to New York. You’d need to go back on yourself to Frankfurt before heading to New York. This problem is alleviated with the Icelandic carriers, as Iceland naturally falls in the middle of most Transatlantic routes. As such, it is expected that Icelandair will now have around 3.8% of the transatlantic market.
It is likely that the airlines will cut down on some of their overlapping routes, and with no need to compete, WOW’s prices could rise to make the subsidiary more profitable. In addition, by allowing codesharing on flights, the available routes for passengers will drastically increase.
A New Chapter
Speaking about the news Bogi Nils Bogason, CEO of Icelandair Group, said that this would mark a new chapter in WOW Air’s History. “Wow Air has in recent years built a strong brand and enjoyed great success in the company‘s markets to and from Iceland and across the Atlantic. There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals”
“A new chapter now starts where Wow air gets an opportunity to grow and prosper with a strong backer like Icelandair Group that will strengthen the foundations of the company,” he added, “and strengthen its international competitiveness even further.”
Proud Of Success
In contrast, WOW Air’s CEO, Skúli Mogensen, said he was proud of the success of his airline. “I am very proud of the success and development that we at WOW Air have enjoyed in the past few years and I am thankful for the response we have received since our very first flight. We have created a strong team that has reached remarkable success and has been a pioneer in low cost flights across the North-Atlantic. A new chapter now starts where WOW air gets an opportunity to grow and prosper with a strong backer like Icelandair Group that will strengthen the foundations of the company and strengthen its international competitiveness even further.”
What do you make of the news of WOW Air’s acquisition? Let us know in the comments down below!