It appears that the Wow factor of one of Europe's most dynamic low-budget carriers has lost a bit of altitude. Iceland's Wow Air announced Wednesday its financial picture is facing anything but blue skies, with its CEO admitting that fourth-quarter results are worse than they expected.
The airline added that cost-cutting measures have already started to take place, such as returning four airbuses (two A330s, plus an A321, and an A320) to Los Angeles-based Air Lease Corporation, a company that's been working with Wow since 2016. The 20 percent reduction of planes leaves Wow with only a fleet of 16 craft, reducing carriage capacity by 25 percent, as the company only has one wide-bodied A330 airbus remaining.
It was expected that the financial demise of its chief Icelandic competitor, Primera, would at least open up the market for Wow Air. But CEO Skuli Mogensen said the folding of Primera did more damage than good by focusing additional negative attention on the Icelandic airline market, including Wow's own internal difficulties. Despite securing $70 million in funding in September, the company owes millions to creditors including Iceland's public airport operator Isavia. Wow Air also lost $45 million in 2017 and the first six months of 2018.
“Due to the continuous negative events all our lessors, creditors, and authorities have been monitoring the situation even closer and demanding stricter payment terms than before, further putting pressure on our cash flow," said Mogensen.
A couple of events included the rejection of a $25-million deal that would have enabled Wow to sell off some of its assets and lease them from the purchaser. Another initiative was to have had Icelandair, the country's biggest airline, to take over Wow by the end of November. If the two airlines couldn't agree to conditions of the $15-million deal, which has been put off until further notice. While the takeover might be good news for the industry, critics claim that fares on board the low-cost carrier will increase dramatically.
Meanwhile, restructuring of the cash-strapped Wow Air continues, as it promised all employees will be paid on Friday, despite rumors to the contrary. And despite a reduced fleet, the company indicated that all of its flights to the rest of Europe and across the Atlantic will continue. The carrier added that introducing New Delhi as a destination is still slated to happen before the end of the year.