Icelandair Cancels WOW Air Takeover

In early November it was announced that Icelandair intended to acquire WOW Air, as Icelandair entered into a share purchasing agreement to purchase all WOW Air shares. With this deal, WOW Air would receive a total of 5.4% of Icelandair Group’s shares after the transition.

To say that this deal was much needed both for Icelandic aviation on the whole, and for WOW Air specifically, would be an understatement. Well, there’s some bad news on that front. It looks like this takeover won’t happen at all.

Icelandair cancels their WOW Air takeover

The purchase agreement signed on November 5 by both airlines has been canceled. Per the press release:

Icelandair Group hf. issued a stock exchange release last Monday, November 26th, stating that the company estimated that it would be unlikely that all of the conditions in the share purchase agreement would be fulfilled by the shareholders’ meeting on November 30th.

That situation remains unchanged.

Therefore, it is unlikely that the Board of Directors of Icelandair Group can recommend to the shareholders that they agree to the purchase agreement. Furthermore, the Board does not intend to submit to the shareholders’ meeting a proposal to postpone decision-making on the purchase agreement.

Icelandair’s CEO had the following to say regarding the situation:

“The planned acquisition of Icelandair Group of Wow air will not go through. The Board of Directors and management of both companies have worked on this project in earnest. This 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. “

Meanwhile WOW Air’s CEO had the following to say:

“It was clear at the outset that it was an ambitious task to complete all the conditions of the share purchase agreement in this short period. We thank the Icelandair Group’s management team for this challenging project, and also wish the management and staff of Icelandair Group all the best.”

So while it’s still possible that a new agreement will be worked out, it seems like it’s far from a sure bet at this point.

What does that mean for WOW Air?

We’ve seen a couple of European airlines go out of business in the past few months. The winter season is ahead of us, which is historically the most difficult season for low cost transatlantic airlines.

WOW Air has just returned four planes to their leasing companies, and they’ve also been cutting routes nonstop. At this point they have just four remaining year-round US destinations.

In order for WOW Air to succeed they truly need an extensive route network. Their model is about connecting US and European cities, and without a dozen destinations on each side of the Atlantic, that’s certainly more challenging.

The company has assured employees that they’ll be paid as usual this Friday, and the CEO had the following to say about the position of the company:

“Due to the continuous negative events all our lessors, creditors and authorities have been monitoring the situation even closer and demanding stricter payment terms then before further putting pressure on our cash flow.

“As a result, our Q4 results are materially worse than originally anticipated.”

The airline has limited cash reserves, their creditors have no flexibility when it comes to payments, the airline is constantly adjusting their route network, and the winter is ahead of us.

If the airline stands any chance of making it, they’re going to need to be taken over by another airline, or get some major new investors.

Comments

  1. Good riddance. We don’t need these low cost airlines as all they do is provide an excuse for the other airlines to reduce service levels. They’re a cancer.

  2. WOW probably has weeks left at most, and to be fair I never did understand why Icelandair wanted to take them over and try and preserve the brand rather than let them fold.

    Norwegian has got to be concerned about this – they will almost certainly be the last remaining long-haul low-cost carrier wishing a few weeks and I understand they still fail to turn a profit on many of their long haul routes. They bit themselves some time with a positive summer season but how long can they hold out before selling themselves to IAG or LH? Seems almost inevitable in this climate.

  3. Turns out you can’t really transplant the short-haul LCC model onto long-haul routes without major modifications. Sure, promo fares on TATL LCCs can seem compelling, but when you add on all the extras you may need, you’ve easily exceeded the lowest fare offered by legacies. Apparently the legacy carriers have found some creative ways to offer cheap economy tickets, all the while still offering more connections at more times.

    The long-term downside is that legacies have now started pushing basic economy on long-haul flights, which makes published fares rather deceptive and confusing for occasional travelers.

  4. Sam Kim, that was my first thought too…lots of magenta to paint over. If I’m not mistaken the seats are that color too?!?

  5. So, I just booked Dec 16-18 SXF-DTW via KEF. Should I be worried? I kinda need to go on that trip.

    Previous experience on WOW was meh but cheap enough.

  6. I can’t imagine why Icelandair wanted them in the first place. Just let them go out of business and Icelandair’s problems are solved.

  7. I’ll chime in since henry LAX hasn’t yet. Lucky, this post is just another example of your fear-mongering bashing of WOW. And please spare us from feigning ignorance about losing your sponsorship

  8. lol @Der Fliegende Amerikaner, you beat me to it.

    Nice work on calling out WOW, Lucky. Unsurprisingly, your foil who tried to pretend you were just bashing them is completely silent right now.

  9. According to the website https://wowair.is/investors/media/ there is a provisional agreement for
    Indigo Partners to invest in WOW.

    “Indigo Partners LLC (“Indigo”), and WOW air (“WOW”), the Icelandic airline based in Reykjavik, have agreed in principle for Indigo to invest in WOW. Terms of the transaction were not disclosed. Following successful completion of due diligence, the parties would work to close as soon as practicable. “

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