Breaking: WOW Air has now declared bankruptcy. The airline will no longer be flying:
WOW Air’s bondholders have agreed a deal with the airline to convert debts into equity. Releasing 49% of the company to their creditors gives WOW a bit more time to find a new buyer and will keep them flying for the short term future at least.
Beleaguered Icelandic carrier WOW Air has had a last minute reprieve in a week that was shaping up to look like their last. Announced yesterday, a deal brokered with their creditors has bought the airline some time to turn things around, and will keep them flying, for now.
Following months of failed deals and cost cutting measures, WOW’s bondholders have agreed to turn some of the airline’s debt into equity of the company. They’ve taken 49% of the business in lieu of debt payments, relieving some of the pressure on the airline in terms of outgoings.
The other 51% is still up for sale, and WOW need a new buyer to step forward fast.
The WOW Air saga
Like all great Icelandic sagas, this one is filled with trials, tribulations, failed promises and some good old Viking conflict. It all began when WOW suffered serious losses, a combination of high fuel prices, low demand and their dirt cheap transatlantic fares.
Teetering on the edge of collapse, WOW were hoping a purchase deal with Indigo partners would save them from bankruptcy. But last week, at the very last minute, the deal collapsed, and Indigo pulled out.
Enter Icelandair Group, who had last year expressed their interest in buying WOW. So much so, in fact, they signed a purchase order for the struggling airline. However, when WOW were unable to meet their conditions of the sale in time, that deal also ended.
Now, surely, it was time for Icelandair to buy. WOW Air had spent more time figuring out the nuances of deals, so we felt certain that a rescue operation was in place.
Sadly, that was not to be either, as Icelandair too pulled out of the WOW Air deal.
On Monday, the impact of having no prospective buyer in the pipeline was starting to show, as WOW began cancelling flights and rumors of administration began to circulate.
A ray of hope
Yesterday, WOW Air’s creditors threw the airline a much needed lifeline. The airline announced a deal with its bondholders to convert its current debts into shares for 49% of the company. A statement from the airline said:
“Bondholders have formally approved to convert their bonds into equity and formal discussions with investors have commenced to fund the company,”
According to Bloomberg, bond holders include BNY Mellon, Forte Fondsforvaltning, Hansainvest Hanseatische Investment and Universal Investment. Although this move doesn’t create any cash for the airline, it does reduce future loan payments, which buys the airline time to financially restructure.
Although this is good news for WOW, incredible in fact, they still need to find a buyer for the other 51% to truly avoid bankruptcy. They still need a cash injection totaling around ISK 5bn ($41m) to ensure its continued operation.
Is it safe to book flights on WOW Air?
WOW continue to sell flights between the US and Europe, and although things are certainly looking up for the airline, they’re a long way from being fully out of the woods.
If you are booking with WOW, we strongly suggest using a credit card that comes with trip cancellation insurance or take out your own policy. Double check that any policy you hold covers the airline going into administration, as not all do (as some found out the hard way when Primera went under).
For now, at least, WOW Air have been given a little breathing room to continue gracing our skies with their pretty purple planes. Simple Flying hope a suitable buyer comes forward soon to keep this Icelandic airline in business.