In early November it was announced that Icelandair intended to acquire WOW Air, as Icelandair entered into a share purchasing agreement to purchase all WOW Air shares. With this deal, WOW Air would receive a total of 5.4% of Icelandair Group’s shares after the transition.
To say that this deal was much needed both for Icelandic aviation on the whole, and for WOW Air specifically, would be an understatement. Well, there’s some bad news on that front. It looks like this takeover won’t happen at all.
Icelandair cancels their WOW Air takeover
The purchase agreement signed on November 5 by both airlines has been canceled. Per the press release:
Icelandair Group hf. issued a stock exchange release last Monday, November 26th, stating that the company estimated that it would be unlikely that all of the conditions in the share purchase agreement would be fulfilled by the shareholders’ meeting on November 30th.
That situation remains unchanged.
Therefore, it is unlikely that the Board of Directors of Icelandair Group can recommend to the shareholders that they agree to the purchase agreement. Furthermore, the Board does not intend to submit to the shareholders’ meeting a proposal to postpone decision-making on the purchase agreement.
Icelandair’s CEO had the following to say regarding the situation:
“The planned acquisition of Icelandair Group of Wow air will not go through. The Board of Directors and management of both companies have worked on this project in earnest. This conclusion is certainly disappointing. We want to thank WOW air‘s management for a good cooperation in the project during recent weeks . All our best wishes go out to the owners and staff of the Wow air. “
Meanwhile WOW Air’s CEO had the following to say:
“It was clear at the outset that it was an ambitious task to complete all the conditions of the share purchase agreement in this short period. We thank the Icelandair Group’s management team for this challenging project, and also wish the management and staff of Icelandair Group all the best.”
So while it’s still possible that a new agreement will be worked out, it seems like it’s far from a sure bet at this point.
What does that mean for WOW Air?
We’ve seen a couple of European airlines go out of business in the past few months. The winter season is ahead of us, which is historically the most difficult season for low cost transatlantic airlines.
WOW Air has just returned four planes to their leasing companies, and they’ve also been cutting routes nonstop. At this point they have just four remaining year-round US destinations.
In order for WOW Air to succeed they truly need an extensive route network. Their model is about connecting US and European cities, and without a dozen destinations on each side of the Atlantic, that’s certainly more challenging.
The company has assured employees that they’ll be paid as usual this Friday, and the CEO had the following to say about the position of the company:
“Due to the continuous negative events all our lessors, creditors and authorities have been monitoring the situation even closer and demanding stricter payment terms then before further putting pressure on our cash flow.
“As a result, our Q4 results are materially worse than originally anticipated.”
The airline has limited cash reserves, their creditors have no flexibility when it comes to payments, the airline is constantly adjusting their route network, and the winter is ahead of us.
If the airline stands any chance of making it, they’re going to need to be taken over by another airline, or get some major new investors.