For a while, I’ve had a partially written blog post sitting in my drafts folder, talking about some of the less financially secure carriers, following the collapse of Primera Air and Cobalt recently.
Well it appears that one of the airlines that I was going to mention, Wow Air of Iceland, has been purchased by their competitor IcelandAir for the kind of money that airlines lose down the back of a sofa, roughly $18m in an all-share deal. That kind of cash won’t even buy you a new Boeing 737 or Airbus A320.
Bogi Nils Bogason, Interim President & CEO, Icelandair Group said:
“WOW air has in recent years built a strong brand and enjoyed great success in the company‘s markets to and from Iceland and across the Atlantic.. There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals. The tourism industry is one of the cornerstones of the Icelandic economy and it is important that flights to and from Iceland will remain frequent.”
Wow Air are an ultra low cost carrier (ULCC) in the model or RyanAir, and thus charge for pretty much everything. IcelandAir aren’t quite in the same league in that they still have a premium economy product which they call Saga Class.
However this merger isn’t going to be easy for both airlines. IcelandAir have a primarily Boeing fleet, with a mixture of 757s and 767s where as Wow have a mainly Airbus fleet for A320 and A330 aircraft.
Between them they will have roughly 3.8% of the trans-Atlantic market, so it’s not going to make a significant difference, however it may put pressure on other low cost players like Norwegian who play in a similar space.
Incidentally, Norwegian sold a number of brand-new A320neo aircraft in order to raise some cash, presumably due to their challenging state of their finances.
Oil is now at $85 a barrel and creeping upwards, so I doubt this will be the last move like that which we see, especially in the long-haul, low-cost segment. Even the combined carrier may not be strong-enough to cope with all the financial headwinds to come.