Is WOW Air On The Brink Of Major Financial Troubles?

Just this month, Europe has seen the collapse of two airlines, Primera Air earlier this month Cobalt Air just yesterday!

They join the ranks of other casualties this year such as Air Berlin, who was swallowed up in the fierce European low-cost carrier market

An Air Berlin jet takes off right before their closure.
An Air Berlin jet takes off right before their closure.

Readers might also be shocked to learn that Air Belgium might be about to go under as well, recently switching to charter from running normal serviced routes.

Many industry commentators have placed big airlines like Norwegian, Jet Airways and Etihad on watch, as they struggle with various financial and capital issues.

And they might be about to add one more to that list… WOW Air.

What is the story with WOW Air?

For those not in the know, WOW Air is a carrier that is based out of Iceland. Thanks to their unique hub at Keflavik International Airport in Reykjavik, they can easily reach many European AND North American destinations with their fleet of 14 Airbus A321, 3 Airbus A320 aircraft, and 3 Airbus A330.

They want their hub country of Iceland to become the ‘Dubai’ of the North, being a central hub for travel between the continents, just like how Dubai is situated between Europe and Asia.

WOW Air Routemap
WOW Air route map

We have previously reported on WOW Air and how they are rapidly expanding.

However, that might be about to change with news that they are running into some expansion issues.

What is the evidence of problems with WOW Air?

We only need to look back to two days ago, when WOW Air canceled three of its routes. Now, Airlines cancel and move routes all the time, but it’s rare to see an airline cancel three routes all in the same region (Mid-west United States). After all, why not just reduce service on the route if there is less demand  (Either by using a less capacity plane or reduce frequency).

We saw the very same thing with Primera Air suddenly canceled all flights to their destination of Birmingham, just before they went bankrupt.

WOW Air has also had to slow down on its expansion plans, as rising fuel prices have limited its ability to tap into the Asian air market goldrush.

Plus, it seems that the transatlantic trade market has stagnated, with every carrier from Norwegian to British Airways reducing routes between the two continents.

Skuli Mogensen
WOW Air is owned solely by Founder and CEO Skuli Mogensen. Photo: WOW Air

Furthermore, it turns out that WOW Air is planning a public offering. What this means is that they want to sell part of the company to raise capital, a common tactic seen in more start-ups. One could see this as a way to increase capital to expand, or to reduce their expenses by having more capital at hand to pay debts.

“To continue our growth we will have to look at various opportunities to find a strategic partner, go public, et cetera. We haven’t really selected which path to take.” – Founder and CEO Skuli Mogensen

He added that he would not be selling the airline.

With more capital, they could continue their rapid expansion and hopefully make a profit by sheer market saturation, much like the start-up model of Uber.

The last item of evidence would be that they actually made a loss last year of $45 million USD.  Predictions show that loses for the following year will come in at around $28 million USD.

We do hope that they can remain in business, as competition is good for the market, but we will see.

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