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CEO Skuli Mogensen pictured in better times (photo: WOW air)

WOW air looks for investors to stop losses

The Icelandic budget carrier has hired a company to sell bonds to raise finance to keep its growth on track.

Iceland’s WOW air has hired Pareto Securities to sell bonds after losing millions over the last 12 months.

The low-cost airline is on the hunt for new capital to keep the company steady for a possible stock market launch sometime in the next 18 months.

According to Icelandic media, such as Fréttabladit, WOW has engaged Norway’s Pareto to try to sell bonds to European investors in order to secure proceeds of between 6 billion and 12 billion Icelandic krona (€50 million to €100 million).

The prospectus designed to attract investors shows an operating loss of $45 million over a 12-month period from July 2017 to the end of June 2018.

This is to be seen in relation to an operating profit of $4 million throughout the calendar year of 2017. The money has therefore fallen out of the box in the first half of 2018.

WOW air recently published its accounts for 2017, revealing a net loss of $22 million, which it blamed on rising fuel prices, fluctuations in the local currency, increased competition and, not least, increasing interest rates.

Investors who decide to inject money into the Icelandic carrier should have a firm belief that future plans can be realised, as the proceeds from the bond sale will mainly be used to cover a number of debts.

Future growth?
Overall, WOW air expects an operating loss (EBITDA) of $6 million in 2018. According to the prospectus, a positive operating profit of $64 million in 2019 is expected based on an increase in revenue from $486 million in 2017 to $826 million in 2019.

Such expectations will require the second half of 2018 to develop significantly better than the first half, something that may prove difficult in a continued high-pressure market.

WOW air is fighting an intense battle with the rival Icelandair on the air traffic market between Iceland and the main markets in Europe and North America. But WOW claims that its market share in Iceland is currently 37%, with the expectation of becoming the biggest player by the end of 2019.

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