Icelandair reportedly intends to buy out its hometown ultra-low-cost rival WOW Air. The takeover of the struggling long-haul budget carrier will require approval from government regulators and shareholders, but WOW CEO Skúli Mogensen has told employees that the proposed deal could be complete in a matter of weeks.
According to reports, Icelandair Group intends to quickly complete the purchase of ultra-low-cost-carrier (ULCC) WOW Air. Both Iceland Air and WOW share Reykjavík–Keflavík International Airport (KEF) as a home base and operate entirely international route maps.
Officials at both carriers say WOW will continue to operate as a separate carrier despite the new ownership. The proposed deal will need the blessings of investors and regulators.
“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,” current Icelandair Group CEO Bogi Nils Bogason told Airways in a statement announcing the planned takeover. “There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals.”
Bogason’s complimentary assessment of WOW Air is betrayed by the fact that the Reykjavik-based budget airline has suffered a number of recent high profile public relations embarrassments and has struggled to maintain profitability since its founding in 2011.
The carrier even recently hired Ben Baldanza, who formerly led Spirit Airlines, to help right the ship. Baldanza, in turn, implemented a strict, no exceptions fee collection policy, in the hope passengers who come better understand the value of amenities and will be more likely to appreciate both the low base fares and the value of those add-on services.
“We have to do better,” WOW Air CEO Skúli Mogensen said this summer after announcing a series of steps to win back customer and investor confidence. “It’s obviously in our interest to fix it.”
In an internal memo to employees this week, obtained by the Reykjavik Grapevine, however, Mogensen seems to admit that the budget carrier was no longer in a strong enough position to survive on its own.
“I realize this will come as a shock to many of you and obviously it was not part of the original game plan,” he told employees. “However, given the circumstances I think this is the best solution for our team, our passengers, the continuity of WOW Air as a low-cost carrier and not least for the travel industry in Iceland. I encourage you to look at this as an opportunity to continue our journey now as a part of a much stronger group that can enable us to succeed long term.”
Mogensen told workers that day-to-day operations would continue business as usual. He added that he anticipates the takeover will be complete within three weeks depending on regulatory and shareholder approval.