Iceland's biggest airline Icelandair and its strongest competitor WOW Air have announced that the former's owner, the Icelandair-Group, will buy all shares of the latter in a deal worth up to $18 million but may end up costig only $6 million if certain conditions and targets are not met.
While Icelandair is over 80 years old, WOW is a fairly new airline and has only started service in 2011 and has since been a strong competitor for Icelandair. WOW Air embarked on a massive expansion course in recdnt times and both airlines are continuously involved in a fierce fight over the lowest prices across the Atlantic. But the low-cost carrier has been struggeling over the past year, it has posted a $25 million net-loss for 2017 and while it expected a loss of $9 million, the rising fuel price will likely cause a loss bigger than anticipated. In recent weeks the airline also announced that service to five destinations will end in due time because they are not financially sustainable enough.
Icelandair and WOW air flight attendants together at Keflavík airport.Photo: Golli
But not only WOW Air is facing headwind, after estimating that Icelandair's profit will only be about 25% of what has been anticipated, the former CEO stepped down. Fuel costs have contributed to this decline in profit but also WOW Air's rapid expansion into secondary US-cities has been cited as counter-productive for profits
In a combined statement the carriers said that, if the deal passes regulatory approval, both carriers identity will remain as is and they will continue to operate under seperate AOCs (Air Operation Certificate) and synergies between the airlines will help to make the deal viable. WOW Air founder Skúli Mogensen is hoping that with a financially stable partner WOW Air can make profits again and also that the rivalry between the two carriers will end.