Icelandair Buying Wow Air: End of Low Cost Europe Fares Coming?

Low cost transatlantic carrier Primera has gone out of business while Wow Air cuts routes. Norwegian is selling planes and could still be acquired by British Airways parent IAG.

The market for flying passengers across the Pond at low prices is being shaken up. There was too much capacity pushing down prices too far especially as fuel prices rise.

Now it looks like we’re seeing some actual consolidation in this market: Icelandair is buying Wow Air.

The acquisition is subject to, approval by Icelandair Group‘s shareholders, the approval of the Icelandic competition authorities and a due diligence.

As consideration for the shares, the shareholders of WOW air will, subject to conditions, receive a total of 272.341.867 shares or the equivalent of 5.4% of Icelandair Group‘s shares after the transaction. Thereof, 178.066.520 shares or 3.5% of the shares as consideration for the sold shares. The consideration can increase to 4.8% or decrease to 0.0% in accordance with certain conditions set forth in the share purchase agreement. 94.275.347 shares or 1.8% of the shares will be paid due to conversion of a subordinated loan into equity.


Wow Air, Copyright: zhukovsky / 123RF Stock Photo

Icelandair is the veteran at flying passengers to Europe at low costs, Wow Air has duplicated several routes, and the Reykjavik airport has busted at the seams with them both along with growth there from other carriers (American is looking at expanding their Dallas Fort-Worth service to year round).

Wow Air has struggled yet explained they’re dropping routes because they make so much money, making only a little money on a route wasn’t enough because of all the money they could make elsewhere. That was.. far fetched.

The two carriers represent just 3.8% of the transatlantic market — but a larger portion of the low cost market, and play a role driving down prices. More directly they compete against each other.

I’ve called the last two years the golden age of air travel for customers on a budget. There’s still overcapacity between the US and China driving down prices to Asia. And there’s still a low cost carrier market across the Atlantic but the regular ability to buy transatlantic sub-$300 fares may be limited.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. They published that they are making money and likely making the books look like they are making money so they could sell the company I would bet. Seems like a typical formula for many corporate mergers. Then the buyer finds out the real truth later. In this case I doubt Icelandair is that dumb.

  2. well this should be interesting to watch it play out. Two different fleets and models. Maybe IcelandAir is looking at the routes their acquiring ? Could be the “Mouse that Roared”

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