Posted on: 04 December 2018 by Mark Howells
LARA editor Mark Thomas summarises the latest happenings across the low-fare and regional aviation industry.
It’s been quite a week for Icelandic budget carrier Wow air and its founder and CEO, Skúli Mogensen.
The self-confessed “accidental airline guy” had a preliminary deal agreed with compatriot Icelandair Group for his suddenly struggling long-haul low-fare carrier to be acquired – before the latter abruptly bailed out last week citing a lack of enough time to get the deal done.
But just hours later he pulled a surprisingly big rabbit out of the hat by confirming that another preliminary agreement was in place with ultra-low-cost airline specialist investor Indigo Partners. No terms of the transaction have yet been disclosed, and there’s the due diligence process to complete, but the involvement of Indigo and its renowned (and ultra-cost conscious) managing partner, Bill Franke, is a reassuring presence.
Any deal would see Mogensen remain a principal investor in Wow, and he will take heart from the knowledge that Indigo has impressive buying power. Wow has an all-Airbus fleet of 16 aircraft, having just days ago returned four more to lessors, but Indigo last year ordered a whopping 430 A320neo and A321neo aircraft at the Dubai Airshow at a price of nearly US$50 billion.
Having seen how Indigo worked with Singapore-based Tiger Airways and Spirit Airlines in Florida, it will be fascinating to see how it steers Wow’s strategy in the long-haul budget sector, an area it has not previously worked in. Most of Indigo’s experience with its present ULCC crop (Wizz, Frontier, Volaris and JetSMART) is in the short-haul segment.
Wow clearly needs help – its latest nine-month figures to September 2018 show that despite revenues rising by nearly a third year-on-year to $501 million, it suffered a total loss over the same period of $33.6 million, much heavier than a loss of $13.5 million last year.
But it remains an airline that has helped to move the goalposts in terms of budget long-distance travel, following in the footsteps of AirAsia and Norwegian, and many would like to see its innovative ‘accidental airline’ founder stick around for the long-haul.
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