WOW Air Could Be Saved By An Investment From Indigo Partners 3

WOW Air is in a bit of a pickle. Earlier this week, they were going to be bought up by rival Icelandair but yesterday discovered that it would never come to pass.

WOW Air Collapse
Icelandair has canceled their bid to purchase WOW Air. Photo: WOW Air

Then, WOW air announced that it would be returning four aircraft to their lessors as a sale-and-lease-back offer fell through and the financial situation worsened due to stricter demands by suppliers and contractors. They were really starting to feel the pressure from their creditors.

But there is a new hopeful twist as firm Indigo Partners has agreed (in principle) to invest in the struggling airline.

Who is Indigo Partners?

You might have never have heard of Indigo Partners, but you might have heard of their airlines:

  • Frontier Airlines – America
  • JetSmart – Chile
  • Volaris – Mexico
  • Wizz Air – Hungarian / Eastern Europe
Indigo Airlines
The fleet of Indigo Partner Airlines flying in formation (Computer generated).

Indigo Partners, headed by group managing partner Bill Franke, specializes in creating and managing ‘ultra low cost’ airlines. Airlines that are so cheap to fly on that deals can be had for insane prices.

To understand how big of a market player they are, in the 2017 Dubai Airshow, they put in an order for: 273 A320neos and 157 A321neos for $49.5 billion at list prices (146 aircraft will go to Wizz, 134 to Frontier, 80 to Volaris and 70 to JetSmart).

Dubai Air Show WOW
The orders from the 2017 Dubai Air Show

This would be a perfect match for WOW and it’s very likely that they would see massive investment in the airline. So much so that it might actually be bad news for Icelandair (Perhaps their shareholders should not have passed on the chance to buy WOW).

At any rate, Icelandair expressed happiness for WOW’s good fortune (After all, Iceland is a small island and it is likely that many of the staff and management know each other personally).

“The conclusion is certainly disappointing, We want to thank WOW Air’s management for a good cooperation in the project during recent weeks. All our best wishes go out to the owners and staff of the WOW Air. – Bogi Nils Bogason, Icelandair Group’s interim president and CEO

WOW Air currently has a fleet size of only 16 planes (Losing four just earlier this week). Indigo could potentially loan them up to 50 to 100 new jets, allowing them to instantly dominate routes between Europe and America from their Iceland hub.

“We have a strategic vision for the airline, and look forward to working with its employees and agents to deliver that vision,” – Bill Franke

There is also a big possibility that passengers will be able to transfer between the airlines, allowing someone to fly from Eastern Europe into South America (Wizz Air – WOW Air – Frontier – Volaris – JetSmart) for very cheap. Although, it would be a very no-frills service with plenty of waiting around at airports.

The deal is currently undergoing due diligence, and it is understood that if completed, WOW Air CEO Skuli Mogensen would still be the principal owner of the airline.

What do you think? Is this great for WOW or should they look for a better deal?

3 Comments

  1. If Indigo takes over WOW Air, it could have serious consequences for Icelandair.

    When initially Icelandair proposed to take over WOW Air, it had the opportunity to rationalise the two airlines so that both the companies would not experience further losses.

    It will be interesting to see if Indigo does indeed proceed to takeover WOW Air, and if it does , to see whats strategy will be.

    It may mean that Indigo may decide to allow WOW Air to continue to compete with Icelandair and ” fight to the finish” so that the stronger of the two will survive. Indigo probably may have deeper pockets, so that it could afford for the airline to stay afloat
    longer.

    Will that even lead to Icelandair being taken over by another company with deep pockets or will it be the first to throw in the towel?

    Or will there still be a possibility for Icelandair and WOW Air to talk to each other and reduce overlaps in routes so that they will both be able to increase their yield and stop losing any more money? The airline market travelling via Iceland at the moment may not have enough room for two airlines of their size, and potential to increase the size of the market could be limited. What is more, more non-Icelandic airlines are now flying into Keflavik, thus increasing competition even more and adding more pressure to both the Icelandic airlines.

    Who knows what will happen (apart from those on the “inside”) ? Time will tell.

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