The Re-Re-Re-Launch of WOW Air. Will It Work This Time?

It seems, according to recent announcements, that a new Iceland-based ultra-low-cost-carrier is rising from the ashes of defunct WOW Air. The shiny new budget airline is not among the reinventions of WOW Air we were told to expect; meanwhile, plans to operate a new U.S-based carrier with the name WOW Air are still in the works despite a number of notable setbacks.

When WOW Air abruptly ceased operations in March of this year, thousands of passengers and crew members were left stranded at the airport. Iceland’s economy is still feeling the lasting effects of the airline’s shuttering, but investors began floating plans to restart the failed ultra-low-cost-carrier almost immediately. Now, after several false starts, it appears that at least two of those plans are moving steadily forward with drastically different approaches.

Wow! Those Fares Are Cheap

The formula behind WOW Air’s meteoric rise was deceptively simple. The company founded by Skúli Mogensen, who was named Iceland Businessman of the Year in both 2011 and 2016, relied on a model of jaw-droppingly cheap airfares coupled with an array of steep ancillary fees to subsidize low-cost fares. The company also invested heavily in leasing newer fuel-efficient aircraft to help keep fuel costs in check and protect razor-thin margins.

The airline benefited from a centralized base at Keflavík International Airport (KEF) in the North Atlantic which allowed the carrier to connect North America and Europe while maintaining an incredibly cost-effective transatlantic route map. This same system has allowed Iceland Air to become an attractive option – even for passengers not planning to visit Iceland other than to change planes.

The Sky Is the Limit

To call WOW Air’s growth rapid would be an understatement. Soon after the airline’s founding in 2011, the company seemed to be making an announcement unveiling new destinations in North America and Europe on an almost daily basis. Less than a year before the carrier’s ultimate bankruptcy, officials announced plans to enter the Asia market in a big way. Flights to New Delhi Indira Gandhi International Airport (DEL) were already being promoted and the company said it intended to begin flying to at least 15 other destinations in the near future.

Wow Is Dead! Long Live Wow!

Unfortunately, WOW Air’s breakneck expansion also contributed to the airline’s eventual demise. By the summer of 2018, then CEO Mogensen was forced to make an apology tour in the face of headlines describing frequently delayed and canceled flights, stranded passengers and apathetic customer service.

“We have to do better,” Mogensen famously told CNBC just nine months before the airline closed its doors for good. “It’s obviously in our interest to fix it.”

Although Boeing is currently in the spotlight for its troubles with the beleaguered 737 Max program, at the time, Boeing’s European rival Airbus was very much in the hot seat for production woes which resulted in drastically delayed deliveries for just the sort of aircraft on which long-haul low-cost carriers depend.

Now defunct, Primera Air blamed Airbus for its failure and Norwegian Air Shuttle warned investors about how delayed deliveries were putting a serious strain on earnings. The production delays at Airbus certainly didn’t help WOW Air’s ambitious expansion plans.

Iceland Air

It seemed for a while that Iceland Air would swoop in to rescue WOW. In November 2018, Mogensen announced that a deal had been reached for the Iceland flag carrier to take over the struggling budget airline. The deal fell apart and last-minute negotiations the following March, likewise, ended without an agreement and WOW was soon after forced to admit defeat.

We Are Back (WAB)?

A group of former WOW Air executives still believed in the bankrupt company, however, and went public with plans to revive the airline. A team, including the former WOW Air Chief of Operations Már Magnússon and former Economic Department Director Sveinn Ingi Steinþórsson, said the tentatively named WAB Air (for We Are Back) would be formed in a partnership with Avianta Capital, which is owned by Aislinn Whittley-Ryan, whose family owns a large stake in Ryanair.

The architects behind plans to rebuild WOW Air indicated that they not only believed that the WOW business model is still solid (despite obvious indications to the contrary), but that they still felt a debt to the airline’s employees and also hoped to mitigate the damage the airline’s sudden collapse did to the economy of Iceland. The project was described as being on a much smaller scale than its predecessor.

The WOW Air reboot was initially scheduled for a Fall of 2020 launch. WAB Air intended to hire approximately 500 new employees for the unnamed airline which would serve many destinations in Europe and in the U.S. formerly served by WOW Air. The new company was projected to have revenues of $157 million based on an initial six aircraft and a route map including 14 airports on both sides of the Atlantic.

When U.S. investor Michele Ballarin swooped in to purchase WOW Air’s remaining assets (including the name) and announced a Dulles International Airport (IAD)-based WOW Air revival of her own, it appeared that plans for WAB Air had been stopped dead in their tracks. Ballarin’s vision has seen its share of obstacles as well since being announced in September.

The American Plan

The slimmed-down budget carrier using the WOW Air livery was originally expected to begin passenger service between IAD and KEF as promised. WOW Air 2.0 officials have since, not only pushed that launch date back multiple times but have also said the new airline will initially fly only cargo rather than offering passenger service. This, despite Ballarin’s stated goal to “make flying fun again.”

There have been a number of indications that the relaunched WOW Air is more hype than action. This includes reports that the airline’s management hadn’t bothered to discuss plans to base the carrier at IAD with the airport’s officials (which would, of course, be an important first step in launching regularly scheduled international passenger service).

Because WOW Air leased rather than owned its fleet, the $404,000 price tag for the bankrupt carrier included little more than rights to the name and livery used by the airline. How valuable the name WOW Air is in light of the company’s checkered history is up for debate.

Play Air Plays Hardball

In a surprising turn of events, it seems the purchase of WOW Air by an American investment firm did not scuttle plans for WAB Air at all. The team is moving forward with its initial plans for a scaled-down long-haul budget carrier based on the WOW Air business model.

Although PLAY Air will use a new red livery, the airline will have much more in common with its predecessor than the planned new iteration of WOW Air. Play Air’s vision for the future sounds remarkably similar to the earlier years of WOW Air.

“WAB Air becomes PLAY,” the airline said in a release announcing the new carrier’s planned November launch. “A new Icelandic low-cost airline has today announced its name as PLAY. PLAY consists of people with a wide range of experience from the aviation industry from airlines such as WOW air and Air Atlanta. The CEO of PLAY is Arnar Már Magnusson.

PLAY flies with Airbus A321 aircraft and will serve destinations across Europe. As of the summer of 2020, the fleet will consist of six aircraft expanding to ten within three years. Plans are to add destinations in North America in spring 2020.”

According to officials at the new airline, the company has already started hiring and will begin selling tickets later this month. The budget carrier also announced plans to give away a thousand free tickets in celebration of the kickoff.

Will It Work This Time?

If the original WOW Air experiment ended in failure, then why are there currently so many groups attempting to recreate the airline? Iceland Air, at one point, saw value in the concept of a Reykjavik-based low-cost carrier. Likewise, the investment firm behind what is arguably among the most successful airlines of our time is keen to be part of the venture, along with former WOW executives (who have hopefully learned from their mistakes). Even Michele Ballarin, who has considerable experience in the aviation industry of her own, is tangibly excited about the prospect of reviving the defunct carrier. Only time will tell whether or not all of this excitement will eventually translate to financial success.

 

[Image: PLAY Air/ Facebook]