WOW Air, popular for its low cost flights across the Atlantic via Iceland, is planning an initial public offering.
WOW air was founded in 2011, making it a relatively young airline. During its time in operation, the airline has grown its fleet to a size of 20. Based at Keflavík International Airport, the airline mimics Icelandair’s route model, stopping off in Iceland when crossing the Atlantic.
Initial Public Offering
An initial public offering is a financial term. The definition is “an act of offering the stock of a company on a public stock exchange for the first time.” The process is usually known as flotation or going public. The term going public is coined from the position of the company. Whereas it would have been in private ownership beforehand, the company is in public ownership after it has been floated. This is because anyone can buy these shares.
The largest initial public offering occurred earlier this year when Spotify sold $29B USD of shares. In contrast, Facebook went public in 2012 $16B USD.
Wow Air Preparations
In preparation for the floatation, WOW air is currently listing bonds. It is reportedly planning on issuing between 500M to 1B Krona (SEK) worth of bonds. This equates to around 55-110M USD. The airline will use these bonds to refinance debt accrued. The airline’s losses between summer 2017 and summer 2018 added up to around 45M USD. Predictions show that loses for the following year will come in at around 28M USD.
WOW air is solely owned by founder and CEO Skuli Mogensen. At a marketing event in London, Mr Mogensen told Reuters “By 2019 we’ll do about a billion in revenue, in U.S. dollars. So that’s when we’re hitting a point where we’ll be an interesting size to go public”
At the time he went on to say “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.” However, he added that he would not be selling the airline.
WOW Business Model
Wow is a low cost Atlantic carrier. It competes primarily with Primera Air and Norwegian, as well as the big carriers. Depending on the date of travel, it can be the cheapest carrier, however it does require a stopover in Iceland. While this isn’t the end of the world for passengers trying to bag the cheapest flight, it does mean deplaning, waiting around, and then boarding another aircraft. Problems could however occur when a flight its delayed. If you miss your connection in Iceland, it could be a while before the next flight home.
No word has been given on whether the business would be floated on the Icelandic stock market or abroad. With a strong presence in both the UK and US, either of these markets could also be in the minds of the airline’s financial teams.