In a major consolidation in Iceland’s aviation market, the airlines say that there will be opportunities for synergies ahead.
Icelandair Group has announced that it has entered into a share purchase agreement to buy all of the shares in Icelandic low-cost rival WOW air.
Under the acquisition, which is subject to approval by the group’s shareholders, not to mention Iceland’s competition authorities, the companies would continue to operate under separate brands.
Their combined market share on the much-prized transatlantic market is around 3.8%, and Icelandair says that the acquisition creates an “opportunity for both companies to become even better prepared to provide international carriers with strong competition in the international airline market”.
A price or terms of the deal have not been disclosed.
However, it is well known that both airlines are struggling, as is Iceland’s broader tourism industry. The travel news site Skift describes this new major consolidation in the country’s aviation market as “a marriage of convenience for the carriers”.
Icelandair CEO Björgólfur Jóhannsson resigned in late August after the group slashed its profit outlook, and a replacement has not yet been found. Its most recent quarterly profits were down by a third.
Loss-making Wow air, meanwhile, had been in a widely publicised search for partners or an investor and was reported to have been working on an initial public offering.
At the top of both airlines there appears to be delight with the agreement, which ensures peace in Iceland’s previously fractured aviation market.
“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,” said Bogi Nils Bogason, Icelandair Group’s interim president and CEO.
“There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals. The tourism industry is one of the cornerstones of the Icelandic economy and it is important that flights to and from Iceland will remain frequent.”
Skúli Mogensen, chief executive and founder of WOW air, added: “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.
“We have created a strong team that has reached remarkable success and has been a pioneer in low-cost flights across the North Atlantic.
“A new chapter now starts where WOW air gets an opportunity to grow and prosper with a strong backer like Icelandair Group that will strengthen the foundations of the company and strengthen its international competitiveness even further.”
In the upcoming days, Icelandair Group will convene a shareholders meeting in which the group‘s shareholders will cast their votes on the acquisition. Another meeting of shareholders will then be convened with at least three weeks’ notice.