The future of low-cost Icelandic airline WOW Air remains uncertain as negotiations to bail out the company have failed.
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An announcement by IcelandAir Group this weekend detailed that any possible involvement with WOW Air will not come to fruition. This comes after WOW Air’s failed negotiations with the foreign-owned Indigo Partners, marking the third failed negotiations in the last few months.
Icelandic news outlet Morgunblaðið has reported that WOW’s losses amount to ISK 22 billion (USD 182 million) and the company’s liquid position is in the negative of ISK 1.4 billion (USD 11.5 million)
For the airline to be saved, a billion krona cash injection would be needed along with a dramatic debt write off. It’s estimated WOW will need ISK 10 billion (USD 82 million) to survive the year.
The financial situation of WOW has meant that the media are paying close attention to its flight schedule. Most flights have continued uninterrupted. Over the weekend a flight to Gatwick was cancelled, and flights to Dublin had considerable delays. The most notable interruption was a flight being grounded in Montreal, Canada. The company has stated this was due to an engine malfunction.
The Icelandic Transport Authority may halt services further. One of the conditions of air operations in Iceland is that airline companies must have the financial capacity to continue operations.
CEO of WOW, Skúli Mogensen sent a letter to the staff of his company at the weekend detailing that he hopes the airline will come out of this financial situation on top. He also stated that some employees had offered to replace some of their wages with capital in the company to help lessen the financial burden.
The Icelandic government has stated that they plan to follow events closely. If flights are cancelled, it is not the responsibility of the government to foot the bill for Icelandic nationals flying home.
The government would also be paying close attention because the news of failed negotiations has a direct impact on the nation’s economy. The króna weakened in value against all major currencies over the weekend, along with all shares on the stock exchange.
WOW’s financial difficulties became apparent last October when the airline began cancelling service routes and offloading aircraft. It then laid off 111 employees as part of negotiations with Indigo Partners, which then fell through.
In the lead up to the airline’s financial difficulty, WOW air had faced criticism for expanding too quickly without the working capital to keep the business model afloat.
If news of this has left you feeling a little sad, here’s a 1-hour compilation of Owen Wilson saying ‘WOW.’