Wow Air acquired by rival Icelandair

A WOW
Air Airbus A330.
WOW

• Icelandair has agreed to acquire
  ultra-low-cost carrier WOW Air.
• WOW Air shareholders are set to receive to 5.4% of
  Icelandair value at $18 million to $25 million.
• The deal is still subject to approval from Icelandair
  Group’s investors, Icelandic antitrust authorities, and due
  diligence.  

Since its founding in 2011, WOW Air has fought Icelandair, the
country’s flag carrier, for business to the island nation. That
competition has officially come to a close. On Monday, Icelandair
announced that it has agreed to acquire the up-start Icelandic
ultra-low-cost carrier.

“Icelandair Group has entered into a share purchase agreement to
purchase all shares of airline WOW air,” the carrier said in a
statement.

In the deal, WOW Air’s shareholders will receive a 5.4% stake in
Icelandair. Reuters values the deal at $18
million. However, Bloomberg reports the WOW Air
deal to be worth be around $25 million, based on a $455 million
valuation of Icelandair. WOW Air’s shareholders will be barred
from selling any newly received Icelandair stock for six months
with half of the shares subjects to an additional six-month
moratorium. 

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“WOW Air has in recent years built a strong brand and
enjoyed great success in the company‘s markets to and from
Iceland and across the Atlantic,” Icelandair Group interim
president and CEO Bogi Nils Bogason said in a statement. “There
are many opportunities for synergies with the two companies but
they will continue to operate under their own brands and
operating approvals.”

An Icelandair Boeing
757-200.
Icelandair

Led by founder and CEO Skuli Mogensen, WOW Air has become
well-known among value-conscious traveler for its rock-bottoms
and flashy fuschia jets.  

The seven-year-old airline made headlines over the past couple of
years with sales featuring $55 and
$70 trans-Atlantic
flights. 

“I am very proud of the success and development that we at WOW
Air have enjoyed in the past few years and I am thankful for the
response we have received since our very first flight,” Mogensen
said in a statement. “We have created a strong team that has
reached remarkable success and has been a pioneer in low-cost
flights across the North Atlantic.”

However, in an internal email obtained by Bloomberg, Mogensen explained
to his employees that part of his rationale for selling to
Icelandair was due to the tough market conditions. 

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Both Icelandic airlines had been struggling this year due to high
fuel prices, a slowdown in tourism to Iceland, and increased
low-cost competition. With the acquisition of WOW Air, the merged
company would hold 3.8% of the trans-Atlantic market. However,
the airlines will continue to operate as separate brands. 

Icelandair operates a fleet of Boeing 737, 757, and 767 aircraft
while WOW Air flies only Airbus A320 family and A330 family
jets. 

Icelandair’s acquisition of WOW Air is still subject to approval
from Icelandair Group’s investors, Icelandic anti-trust
authorities, and due diligence.