WOW Indeed: Icelandair to Acquire Struggling WOW Air
It's been a rough end of the year for WOW Air. After quickly expanding to markets across the US, the ultra-low-cost carrier has cancelled a slew of routes as fuel prices have increased and routes haven't performed as well as expected. New York's JFK, Dallas, St. Louis, Cleveland, Cincinnati and Tel Aviv routes have been causalities of WOW Air's retraction so far.
[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.]
Perhaps on the verge of going under -- as we saw fellow transatlantic low-cost carrier Primera Air fail in October -- WOW Air seems to have found a savior right in its own backyard. Fellow Icelandic low-cost carrier Icelandair is acquiring WOW Air. Current WOW Air shareholders will receive a 5.4% stake in the resulting Icelandair Group.
Before this deal is completed, it must be approved at an Icelandair Group stockholders meeting and get regulatory clearance from the Icelandic Competition Authority.
As part of the announcement, Icelandair Group CEO Bogi Nils Bogason confirms that the two airlines will "continue to operate under their own brands and operating approvals." However, combining forces would allow the two airlines to divvy up markets to see where Icelandair's slightly more premium service or WOW Air's bare-bones fee-heavy service -- or both -- makes the most sense. Or, in corporate speak, this deal will offer "many opportunities for synergies with the two companies."
The approval from Icelandair Group shareholders might be a shoo-in given the stock market's reaction to the news. Before the deal was announced, a 5.4% stake (272,341,867 shares) in the Icelandair Group was worth 2.18 billion Krona (USD $18 million). However, with the Icelandair Group stock currently up as much at 50% in trading Monday, the value WOW Air's shareholders would get from the deal has also surged 50%.
While both Icelandair and WOW Air have made a splash on transatlantic market with their surprisingly-low fares, the two Icelandic airlines currently only account for a combined 3.8% share of the transaltantic market -- with legacy airlines still controlling most of the lift.
This post has been updated with a corrected currency exchange rate.
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