It’s moving on the low cost airlines side in the transatlantic sky: after the bankruptcy of Primera Air last month, Icelandair announced to take possession of WOW Air which was in difficulty for several months.
Icelandair takes over WOW Air
WOW Air is a company offering low cost flights to Europe via Iceland.
We had talked about this airline when it launched its Rekjavik – Montreal flights in 2016. And Matthieu had tested it shortly after the launch of the flights to Montreal: find his photo report on board 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 continued to grow, offering more and more flights, even to the American West Coast (San Francisco for example).
Operational and financial difficulties
Except that all is not rosy on the side of 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 the Icelandic national airline has had to divest itself of certain assets (such as its hotel operations) in order to remain competitive.
The CEO and founder of WOW Air, Skúli Mogensen, about this transation:
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 strengthen its international competitiveness event further.
This transaction remains subject to an agreement with the Icelandic authorities.
A consolidation of the market
To face this type of challenge, and to survive the intense competition in the transatlantic skies, it became 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? Only time will tell.
Reactions of traditional companies
To face this competition from low-cost airlines, traditional airlines have not remained “wings” crossed.
Air Canada has created Air Canada Rouge. The IAG group (British Airways) has created Level. Air France has launched Joon.
And they have adapted to the reality of the market by launching“no frills” rates: luggage, 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.
We always advise you to compare prices “with equivalent services”! If you need a carry-on / checked baggage, the rates will often be equivalent between traditional and low cost airlines!
Here is an example of a fare between WOW (with stopover in Iceland) and Air France (direct).
And then, as our speaker Gautier explained at the milesopedia mini-conference, nothing prevents you from traveling with a low-cost company… by making up for it with your credit card benefits:
- by eating in the airport lounge before your flight
- using travel points to pay for your airfare
The Platinum Card® from American Express, for example, offers unlimited access to Priority Pass lounges (including the National Bank lounge at Montreal-Trudeau YUL) as well as a multitude of Canadian Airport lounges, to the Cardmember + one guest! This makes up for the lack of free food on board companies 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 to be covered by your card issuer in case of problems: in the case of the Primera Air bankruptcy, most people who paid with a Canadian credit card were able to get their money back!
This news shows once again that all is not well with low cost airlines. Especially since we are witnessing a rise in the price of oil that may impact them even more… not to mention the adjustments that traditional airlines are making to be competitive in this strategic transatlantic market!