Trying to make sense of the new WOW Air plans

As previously tipped, the WOW Air brand has a new owner. Michele Ballarin, chairman of USAerospace Associates LLC, recently bought the rights to the failed Icelandic carrier and held a press conference last week to go over some of the details and expectations for what the new WOW will deliver. Trying to figure out how the new business model makes sense is a challenging proposition, to say the least.

We are committed to build on that platform to enable passengers to once again enjoy the experience that WOW created.

– Michele Ballarin, chairman of USAerospace Associates LLC

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No longer an Icelandic airline

While the carrier will still service Iceland its initial operations will run under a FAA-issued operating certificate, not an Icelandic one. Ballarin did suggest that the company would separately pursue a license from the island’s authorities but, like many of the promises made, the timing and utility of such remains unclear. As a result the employment rebound hoped for by locals with the relaunch of the carrier is almost certain to prove disappointing.

She also talks of the idea of “cowboys meeting Vikings” in merging the cultures of her US-based operations with the Icelandic team. But she plans for that to be a positive thing. Ballarin talked significantly about the potential for melding the cultures, bringing management to work in both locations on a regular basis to learn from each other.

A cargo conundrum

Ballarin’s aviation history is focused on cargo operations so brining that to the new venture makes a little sense. Unfortunately, this is a very, very poor time for such efforts. The cargo market is struggling, with nine consecutive month of year-over-year declines according to IATA’s data. The only positive news for the international freight market right now is that capacity growth slowed, perhaps allowing those in the market to rationalize some of the pricing. Adding a new cargo player into the market would break that plan. Yes, there is some demand for Icelandic exports (mostly fish) to the USA. But it remains unclear that there is sufficient unmet demand to support a new operator with limited capacity and route options.

Questions also arise around the planned aircraft for the relaunch and how they will handle the cargo situation. The old WOW mostly flew on single-aisle planes, a type not particularly well suited to cargo operations when flying the relatively long stage lengths that a transatlantic flight would entail while also carrying passengers on board.

Mixed fleet, mixed messages

Another challenge for the fleet is its overall size and makeup. Ballarin suggested that the company would start with just a couple planes, which makes some sense. But she also said the fleet would top out around 10-12 frames, citing that as an optimal profitability position. And she believes a mix of Boeing and Airbus types could prove a viable blend.

With just a dozen planes in service a mixed fleet is almost certainly a bad idea. Costs associated with crew training and redundancy as well as spare parts and other ground handling tasks increase as the fleet diversifies. Given her relatively simple goals for the airline’s markets a mixed fleet does not appear necessary.

Also, the idea that the company could top out at 12 planes and then drive increased margins is hard to reconcile against the competitive market. WOW is not just competing against a larger Icelandair, but eventually against the rest of the Transatlantic market. driving up yields in that segment has not been a particularly successful play by anyone in recent years.

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A passenger focus?

What drew Ballarin to WOW? She loved the purple color and the uniform design. That seems to be enough to justify investing in the operation. But she also says that the brand retains a strong positive image in the market and can be revitalized.

And then come the vague platitudes. Talk of making flying “fun” again is always good for some laughs. A repeated focus on attractive flight attendants during the 20 minute press conference seems perhaps a bit tone-deaf, but okay. And then there’s the the idea of delivering nutritious, delicious meals at 30,000 feet. Not that it is impossible, of course, but it is also far from cheap or consistent. And Ballarin intends to do all of this on an incredibly short timeline and with cheap fares to passengers. A Michelin three-starred chef has worked for the past couple years with an affiliated Ballarin operation and appears involved in the menu planning.

People miss the ability to go out to Keflavik and get on a purple airplane and fly somewhere. Sixty percent of the load factor was from the United States and I know that the Americans – I’m one of them – miss flying on WOW. I think the brand is solid.

She hypes the idea of biometric boarding to speed the process of getting everyone on board, with an apparent target of 8 minutes. Never mind that the choke point is rarely the boarding pass scanning.

Building a lounge for passengers is also apparently a critical step in delivering a quality low-cost product. Probably not in reality, but that’s on the list of things Ballarin says will come. For all passengers, not just those in a premium cabin. “From the economic model, rows 7 to the back of the aircraft really do pay for a lounge used by a handful of people privileged to fly in business or first class. We really want to bring a lounge experience to everyone who flies on board WOW….It is a very innovative thought but one that is long overdue.” The concept appears similar to what Porter Air offers at some of its airport locations. Conversations with airport operators at Keflavik and Dulles are underway to find appropriate space for such.

Ballarin expects to deliver these services and benefits to passengers without having to charge fees for everything. Or at least that’s what was implied in her comments at the press conference, “You can offer better customer experience without breaking the bank. What’s important is not to get on the aircraft and be asked to pay for water. You have beautiful water here, so we’re in discussions with the Icelandic water folks to have that bottled water given to you. That’s extremely important, that people have certain things to count on. You shouldn’t have to over-pay for a seat.” Reading between the lines it is clear that she expects suppliers to provide the goods for free or even pay to get their product in front of the travelers as a marketing expense. That is not a unique expectation in the market but it is also not necessarily a profitable one for those suppliers. Getting in front of the right customers who will eventually buy the product rather than just take the freebies is key. If your base is solely the consumers shopping for the cheapest tickets every time that does not always play out so well.

An impossible timing??

Could flights launch by October as Ballarin claims? Maybe.

Details about what specific aircraft will be used remain unclear, though it seems the planes used for Oasis Aviation Services, another Ballarin-affiliated operation, could be in play. That would make a quick shift into operation a bit easier. But the website is still mostly offline. There’s no indication that the DoT has approved the use of the WOW name as part of Oasis’ operations. And there’s no deal yet with Dulles to use that airport for the service. MWAA Spokeswoman Christina Saul confirmed that the “team at Washington Dulles International Airport held an initial meeting last month with Ms. Ballarin and her associates regarding the process for establishing air service at the airport” but also noted no flights are currently scheduled and there is no specific timeline to announce anything.

With 60% of WOW’s historical demand coming from the United States there is perhaps the passengers to fill the planes, though the market has shown thus far that much of that demand is based on fares.