General aviation

WOW Air-Indigo talks collapse, urgent talks begin with Icelandair

WOW Air entered last-ditch talks with Icelandair over the weekend (photo: WOW Air).

WOW Air, the Icelandic ultra low-cost carrier, is in last-ditch talks with rival Icelandair in a bid to avoid a shut down, after American investment firm Indigo Partners walked away from a potential investment.

In Canada, WOW serves Montreal and Toronto from its hub in Reykjavik.

Talks with Indigo Partners fell apart late Thursday, leaving WOW in desperate need of new cash. The company said in a statement it aimed to conclude negotiations with Icelandair by Monday.

WOW has been trying to raise capital since the fall, when it said a number of factors threw the company’s long-term future into doubt. Since September, WOW has negotiated with Icelandair, Indigo, and now again with Icelandair.

Since then, it has sold four A321 aircraft to Air Canada (which are being pushed into service to deal with the grounding of Boeing Max aircraft around the world), and returned others to leasing companies.

Reinforcing the sense of urgency, Icelandair argued in a statement, “The discussions will be based on the doctrine of competition law regarding the failing firm defence.” That defence indicates Icelandair expects, without a merger, that WOW would go out of business. Therefore, the talks should be exempt from competition laws.

Wow served 160,000 passengers in January, with more than half connecting between North America and Europe. Its flights were 80% full, though capacity was down significantly from the year before as WOW cancelled services and grounded planes. For example, planned flights to Vancouver were cancelled before a single flight could be flown.

A number of WOW and Icelandair services overlap, though with longer-range aircraft, Icelandair serves destinations WOW can’t reach. In addition to Toronto and Montreal, Icelandair serves Vancouver and Edmonton.

WOW and Icelandair together represent only a small fraction of the capacity flying between Canada and Europe, which is dominated by Air Canada, followed by Air Transat.

The exception is in Edmonton, where Icelandair launched services in 2014, and has become a major player in the European market. It flies four times a week to Reykjavik through the summer, competing primarily with KLM. Canadian airlines offer only token summer services to Europe from the Alberta capital.

Indigo, meanwhile, is pursuing an investment in Enerjet, a Canadian charter airline that hopes to rebrand itself into an ultra low-cost carrier with a network across Canada and the United States.

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