Wow Air Touts Long-Term Sustainability After Debtholder Deal

Embattled Icelandic ultra-low-cost-carrier (ULCC) Wow Air remained upbeat on its survival chances after creditors on Monday agreed to convert their bonds into equity and “formal discussions” with investors to fund the company have started. “This is an important milestone in financially restructuring the company and securing the long-term sustainability of Wow Air,” it noted on Tuesday in a short statement, without providing details on its financial state and the nature of the potential new investors.

Indigo Partners last week ended the month-long talks on a $90 million capital injection in Wow and renewed negotiations with its larger rival, Icelandair Group, over a potential combination ended unsuccessfully on Sunday. Icelandair and Wow held failed merger talks last year, but Iceland’s leading airlines decided to try again after Indigo pulled out. However, in an indication that Wow’s financial situation appears critical, Icelandair stressed in a stock exchange release on March 21 that it would base new discussions “on the doctrine of competition law regarding the failing firm defense.” Three days later, the talks collapsed.

Wow experienced a period of rapid expansion, offering rock-bottom fares to gain market share in the Europe-North America transfer market using the geographically strategic location of Reykjavik Keflavík Airport as its base. But the ULCC ran into financial difficulty in 2018 and had to restructure into a much smaller operation and lay off staff. The overhaul included a reduction of its fleet from 20 to 11 aircraft, all single-aisle Airbus models. It placed four Airbus A321s up for sale and decided to return all its A330s to lessors.

According to local media, Wow Air needs to raise at least $40 million to sustain its operations. It carried 3.5 million passengers last year, for a 24 percent increase over 2017. Its load factor averaged 90 percent compared with 88 percent the year before.