Wow Air Announces Details of Potential Indigo Partnership
Icelandic ultra-low-cost carrier Wow Air has released new details regarding its potential partnership with its latest proposed financial savior, private equity firm Indigo Partners. [Update, 3/28/2019: WOW Air has ceased operations. Find our ongoing coverage of WOW Air's collapse, and what affected passengers can do about it, here.]
According to a Jan. 9 letter to Wow Air bondholders obtained by Air Transport World, Wow founder and CEO Skuli Mogensen says Indigo is set to take a 49% stake in the struggling carrier in the form of a convertible loan. Wow has been struggling to get its financial house in order over the past few months, making cuts to both its routes and fleet. Despite its financial strife, Wow has not stopped announcing new cheap fares, like $49 tickets from US cities to Europe.
Indigo partners stepped up at the end 2018 to signal its interest in the Reykjavik-based airline. The latest announcement is now giving more details surrounding that possible arrangement. Under the current agreement, Indigo is set to invest as much as $75 million in Wow. At the time of the first announcement, there was no indication as to how big of a stake in the airline that sum would give Indigo. The loan would have a 10-year maturity, and the total amount invested will depend on the actual needs of the airline. That initial ownership stake could be increased during the term of the loan from Indigo.
The airline and Indigo are still in negotiations on how to deal with a current outstanding loan "from a current shareholder," who is most likely Mogensen, who said in the past he has floated the airline at least 5.5 million euro to keep it afloat. Negotiations are focused around converting that current loan to equity or leaving the loan in place before Indigo finalizes its investment.
H/T: ATW Online
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