WOW Air – in difficulty – bought by Icelandair

The low-cost carriers in the transatlantic skies are on the move: following the bankruptcy of Primera Air last month, Icelandair has announced that it is taking over WOW Air, which had been in difficulty for several months.

Icelandair takes over WOW Air

WOW Air offers low-cost flights to Europe via Iceland. We wrote about this airline when it launched its Rekjavik – Montreal flights in 2016. And Matthieu tested it shortly after the launch of flights to Montreal: see his on-board photo report here.

There is no doubt that WOW air is a low-cost company. Low rates with paid options if you want to add comfort. The company suffers from a hub that is also a fast growing airport and therefore has some problems such as the lack of lounges or simply easily accessible power outlets. The staff on board is friendly, we are also in the minimal service. We could just hope for a little more warmth in the cabin layout (light, power outlets on the seats). But the offer is interesting especially for Montreal which has little or no low-cost airline.

Since then, the company has gone from strength to strength, offering more and more flights, even to the US West Coast (San Francisco, for example).

Operational and financial difficulties

But all is not rosy at WOW Air. The Icelandic low-cost airline is facing major financial difficulties… due to a too fast growth. The company recently announced heavy losses and even had to cut routes it had just set up. In addition, delays in the delivery of new aircraft – Airbus A330neo – have caused planning difficulties… as was the case with the A321neo delays for Primera Air, which quickly went bankrupt. For its part, Icelandair is also facing challenges: WOW Air has slashed prices, and Iceland’s national airline has had to divest certain assets (such as its hotel operations) in order to remain competitive.

CEO and founder of WOW Air, Skúli Mogensen, on this transition:

A new chapter starts where WOW Air gets an opportunity to grow and prosper with a strong backer like Icelandic Group that will strengthen the foundations of the company and reinforce its international competitiveness event further.

This transaction remains subject to agreement with the Icelandic authorities.

A consolidation of the market

To meet these challenges, and survive the intense competition in the transatlantic skies, it was vital for the two companies to join forces. This is called “market consolidation”. Between them, Icelendair and WOW Air have a market share of 3.8%. Will this be enough to avoid disappearing in the months or years to come? Time will tell.

Reactions of traditional companies

To face up to this competition from low-cost carriers, the traditional airlines have not remained “wings” crossed. Air Canada has created Air Canada Rouge. The IAG group (British Airways) has created Level. Air France launched Joon.

And they have adapted to the reality of the market by launching“no frills” fares: baggage and food are often optional. The goal? To be first on search engines like Google Flights even if it means inflating the rate afterwards at the time of booking. In fact, we always recommend comparing fares “for equivalent services”! If you need a carry-on/checked bag, fares will often be equivalent between traditional and low-cost airlines! Here’s an example of a fare between WOW (with a stopover in Iceland) and Air France (direct). And, as our speaker Gautier explained at the milesopedia mini-congress, there’s nothing to stop you flying with a low-cost airline… and making up for it with the benefits of your credit cards:

• by eating in the airport lounge before your flight
• using travel points to pay for your airfare
• …

The Platinum Card^MD from American Express, for example, offers unlimited access to Priority Pass lounges (including the National Bank lounge at Montréal-Trudeau YUL) as well as a multitude of Canadian airport lounges, to the cardholder + one guest! This makes up for the lack of free food on board airlines like WOW Air!

You have an upcoming reservation with WOW Air?

No need to worry if you have an upcoming reservation with WOW Air. This consolidation is a way that the two companies, Icelandair and WOW Air, have found to get out of the financial troubles they are experiencing. The two companies will continue to operate separately: Icelandair is moving towards an “Air Canada – Air Canada Rouge” model by taking over WOW Air. However, if you are looking for tickets for the coming months, we always advise you to compare prices “with equivalent services”! And of course, pay with a Canadian credit card, so that your card issuer will cover you in the event of a problem: in the case of the Primera Air bankruptcy, most people who paid with a Canadian credit card were able to get their money back!

Bottom Line

This news shows once again that all is not well with the low-cost carriers. All the more so as we are witnessing a rise in the price of oil, which is likely to impact them even more… not to mention the adjustments that traditional airlines are making in order to be competitive in this strategic transatlantic market!

Come to discuss that topic in our Facebook Group!