WOW Air’s Unique Move to Become More Profitable
Scott Dylan October 04, 2018
WOW Air is planning something you don’t see very often in the world of low-cost carriers. The airline is planning to sell its shares to the public. An initial public offering (IPO) is expected within the next 12 to 18 months. WOW Air has hired Arion Bank and Arctica Finance to help with gearing up to the IPO.
Why is WOW Air choosing now to go public? The short answer is that the Iceland-based airline needs an infusion of funds if it is going to successfully pursue the growth plans that it has in mind. In fact, WOW’s growth strategy for the next few years can only be described as aggressive. It is this same aggressive approach that’s helped the airline to beat competing carriers throughout Europe and become one of the most popular airlines in the world. Norwegian Air Shuttle, Alitalia, Monarch Airlines, Air Berlin and Small Planet Airlines are just some of the European airlines that haven’t been able to touch the success of WOW Air in recent years.
While WOW has fared better than competitors, it hasn’t exactly been smooth sailing for the airline lately. The budget carrier actually lost $27.5 million before taxes in 2017. It is expected that WOW will lose $6 million in 2018. However, the airline’s CEO has stated that a profit of somewhere between $830 million and $840 million is expected for 2019. WOW Air and other airlines are facing a tough road ahead when it comes to maintaining profitability. Rising oil prices through the end of the year are threatening to raise operating costs and eat into profits.
One of the ways that WOW Air plans to return to being profitable in 2019 is through new ancillary charges. For instance, new charges for such things as extra legroom and meals could be on the horizon. WOW defends its use of ancillary charges as being one of the only ways the budget carrier can successfully compete with larger carriers. WOW currently offers the cheapest way for travelers to get between the United States and Iceland. The truth is that WOW will almost certainly still offer bargains when compared to legacy carriers even when you factor in new fees.
How much does WOW Air intend to raise with its IPO? The airline hopes to be able to raise somewhere between $200 million and $300 million when it goes public. About half of the airline will be up for grabs when the IPO happens. No valuation for the entire airline has been released as of the moment.
I fly WOW from BWI through KEF to European destinations. The planes are clean and comfortable. If you buy up for extra leg room, it is often better than premium economy on the majors. You do pay for food and drinks, but who wants dinner at 9PM outbound anyway? Inbound the selections at KEF are fine if not a bit pricey. Have yet to pay more than $750 RT. I'll buy that stock.
The interior of an airliner has nothing to do with the airliner. Saying A321s suck because AA's interior (which there are 2 or 3) sucks is misleading. The airlines pick those options, not the airframe.
The CEOs profit predictions does not seem correct. Why would they do an IPO earning that amount in 2019....?
This is exactly why American is no longer my first choice for air travel. The 321 is the most uncomfortable aircraft I have ever sat in. I couldn't even get my bag up from under the seat in front of me without out standing.