Update: WOW Air has ceased operations, and all flights have been canceled. Icelandair is offering discounted tickets to passengers stranded by WOW.
This situation sure is changing quickly. At the beginning of the month it looked like Icelandair would acquire WOW Air, though yesterday it was announced that the deal fell through.
This obviously left WOW Air in a challenging position. The airline has been canceling routes left and right, they’re reportedly running out of cash, and the winter is ahead of us, which is the toughest season for airlines operating transatlantic flights.
Now it looks like WOW Air may have just found a new investor, and this time it’s not another airline.
Indigo Partners to invest in WOW Air
There has been an agreement in principle that Indigo Partners will invest in WOW Air, though the terms of the transaction weren’t disclosed.
Following completion of due diligence, the parties will work to close as soon as possible. Under this deal, WOW Air’s CEO and primary shareholder, Skuli Mogensen, would remain a principal investor.
WOW Air’s CEO had the following to say:
“The demand for low-cost air service continues to expand rapidly worldwide, and with Indigo as a partner, we hope to take full advantage of this highly attractive market segment. I am excited to work with Indigo and I am convinced it is the best long-term move for our people and passengers.”
Meanwhile the Managing Partner for Indigo Partners had the following to say:
“Skuli and WOW’s management and employees have done a remarkable job in creating a well-regarded, successful ULCC brand. We have a strategic vision for the airline, and look forward to working with its employees and agents to deliver that vision.”
For those of you not familiar with Indigo Partners, it’s a US private equity firm that specializes in aviation. They have a controlling stake in Frontier Airlines, though also have investments in airlines like Volaris and Wizz Air, and in the past have invested in Spirit Airlines and Tiger Airways.
So they know what they’re doing, and have been very successful at making airlines profitable. I imagine they’re not paying a whole lot to take over WOW Air, though they’ll either be providing significant capital or will be tasked with raising that, given the winter ahead.
What could Indigo Partners be planning for WOW Air?
I’m very curious to see what Indigo Partners’ vision for WOW Air is.
The way I see it, WOW Air got too ambitious too quickly. I feel like if their core business model has any chance of working, WOW Air should focus on markets where they can fly narrowbody aircraft efficiently.
This means not flying to any markets that require A330s (which just offer too much capacity for this type of business model), and not flying to any destinations where their planes have to be on the ground for 20+ hours.
It’s pretty easy to see where the airline got off track, and that just months ago their plan was to expand to over a dozen destinations in Asia.
So my guess is that Indigo Partners will be focused on two things:
- Returning WOW Air to their core business model of operating narrowbody planes across the Atlantic
- Building partnerships with other airlines (perhaps even Frontier?) to offer connectivity on both sides of the Atlantic
Whether or not they can make the airline profitable long term is a different question, though. At a minimum, I think they could make WOW Air a more attractive acquisition target for another airline, rather than the fire sale that the airline was about to have.
What do you think WOW Air needs to do to build a sustainable business model?