It has been an eventful couple of days at Wow Air. After months of negotiations it turned out that Indigo Partners will not be making investment into ailing Icelandic ULCC after all. Discussions with Icelandair Group have been revived ‒ and fell through ‒ for the second time within year.
On March 21, 2019, the airline admitted that months-long negotiations with potential investor Indigo Partners fell through. Wow Air confirmed that the other side cancelled their proposed investment, thus all negotiations between the two have been ceased.
Instead, talks with Icelandair Group were revived, but only for four days. On March 24, 2019 – a day before pre-set deadline, the two parties announced that the negotiations have been cancelled. “Icelandair Group has decided that its possible involvement in WOW air’s operations […] will not materialize. Therefore, all discussions between the parties have been cancelled,” Wow Air announced.
So now Wow Air bond holders and other creditors are discussing voluntary restructuring, which includes converting current debt into equity. Further details are expected later on March 25, 2019, the company claims.
Wow Air has experienced rapid growth in recent years. Since it was established in 2011, the budget carrier has successfully expanded with destinations across Europe, North America and Asia, carrying approximately 2.8 million passengers in 2017, and expecting 3.6 million travelers in 2018, as the airline itself states.
But on the financial side, things have slowed down significantly for Wow Air. In 2017, the airline suffered a $13.5 million loss, while for the first nine months of 2018 financial year it has already reported $33.7 million total comprehensive loss.
Amid financial tensions, Wow Air began coquetting with bigger and stronger Icelandic carrier – Icelandair. Iin November 2018 the two sides officially admitted the negotiations, which came to a halt just three weeks later, as Icelandair pulled out. Wow Air turned to another potential investor, Indigo partners.
Despite ongoing negotiations, the Icelandic ultra low cost carrier announced entering restructuring in mid-December 2018. Claiming it is just a “temporary measure”, the airline began cutting its fleet almost by half and laying off hundreds of its employees.
“This is the most difficult day in the history of WOW air. We have dedicated people who have worked hard to make WOW air a reality and it breaks my heart to downsize the company,” the company’s CEO and founder Skuli Mogensen was quoted as saying at the time. “However, in order to ensure our future and preserve WOW air in the long run, we unfortunately must take these drastic measures“.
UPDATE March 26, 2019:
Wow Air bondhlders have reached an agreement to agreement of converting current debt into equity, the airline has announced. “Bondholders have formally approved to convert their bonds into equity and formal discussions with investors have commenced to fund the company,” the airline announed on March 26, 2019. “This is an important milestone in financially restructuring the company and secure the long-term sustainability of WOW air”.