The future outlook for Icelandic LCC upstart WOW Air is more bleak than ever. Its months-long saga seeking a new partner and additional funding to continue operations took its second hit of the weekend, with Icelandair announcing a deal would not be forthcoming. The statement lacks much in the way of detail, other than to make it clear that the move was initiated by Icelandair, not WOW.
Icelandair Group has decided that its possible involvement in WOW air’s operations, as announced on 20 March 2019, will not materialize. Therefore, all discussions between the parties have ended.
The news comes on the heels of investment group Indigo Partners walking away last week. Indigo was previously seen as the savior after Icelandair’s last dalliance with acquiring WOW ended abruptly.
WOW’s financial struggles are well documented. Its options for surviving at this point, following multiple failed funding efforts, appear slim. The carrier followed in the footsteps of Icelandair, using its Keflavik hub to grow connecting traffic between Europe and North America. It added in funky marketing and great brand recognition, but also remained dependent on the fickle demands of bargain-hunting passengers to fill up the seats on its flights. And then it expanded too quickly, adding new aircraft types and mixing the route profile in an unsustainable manner.
Add in a spike in fuel prices during the Summer 2018 season and WOW’s opportunity appears set to collapse. The fuel prices retreated slightly but the overall market position for the carrier has not improved. It gave up its wide body aircraft and sold off several of the single-aisle planes, too. It tried to cut costs quickly enough to stabilize the operation. And that was somewhat successful.
But with a limited fleet, limited routes and limited cash on hand the next story for the carrier does not seem likely to be a positive one.
WOW issued a statement indicating it would seek to convert some debt to equity, with an update set for Monday.
A majority of WOW air Bond Holders and other creditors of WOW air are in advance discussions with the aim of reaching an agreement on a voluntary restructuring including an agreement of converting current debt into equity and fund the company towards long term sustainability.