Beleaguered budget airline WOW Air has been completely bought out by Icelandair Group, Viðskiptablaðið reports. The board of Icelandair Group bought every share in WOW Air, pending approval from Icelandair shareholders and the Icelandic Competition Authority.
“WOW Air has built up a strong brand over the years, and accomplished a lot under that brand, to and from Iceland over the Atlantic Ocean,” acting director of Icelandair Group Bogi Nils Bogason said in a statement. “It’s a great opportunity for earnings, but the airline will continue to operate under its own initiative and under its own brand.”
MBL reports that WOW Air’s value is currently at 2.1 billion ISK; roughly just over 17 million USD. With this buyout, WOW Air owners will now own a 5.4% share of Icelandair Group, as WOW Air was bought entirely with shares in Icelandair Group. The buyers are obliged to hold onto some of these shares for at least six months, and the rest for 12 months total.
Skúli Mogensen, the director and founder of WOW Air, said he was “very proud of our accomplishments and what we have built in recent years,” saying that the buyout represents a “new chapter” for the airline to grow and expand its reach.
Indeed, their combined share of air traffic to and from Iceland is nearly 80%, with the buyout giving Icelandair Group control of the vast majority of flights to and from Iceland.
DV has published an e-mail which Skúli sent out to WOW Air employees. In it, he says that the entire process should take about three weeks, and still depends on ultimate approval from Icelandair shareholders and the Icelandic Competition Authority.
“There will be no changes in our daily operations and we will continue to service our passengers and destinations as before with the mission to continue to offer the lowest fares to and from Iceland and across the Atlantic,” the e-mail reads in part. “I realize this will come as a shock to many of you and obviously it was not part of the original game plan. 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.”
As reported, WOW Air has struggled with significant financial losses, even while growing its market share. With the combination of the two airlines, WOW Air may add more destinations to its roster, with the help of Icelandair’s resources.