Wow Air shuts down on lack of financing, stranding 2700 flyers

Bloomberg

Wow Air Hf has gone out of business, stranding thousands of passengers and creating potentially huge risks for Iceland’s tiny economy and its growing reliance on tourism.
The discount carrier is the eighth European airline to have failed since the summer as margins are pinched by fluctuating fuel costs and over-capacity that’s sparked a continent-wide fare war.
Wow’s demise should bring short-term relief to local rival Icelandair Hf. Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc — Europe’s three biggest discount airlines — also fly to the island in the North
Atlantic, whose popularity has grown exponentially in recent years thanks to television shows like Game of Thrones.
All 29 flights scheduled for March 28 were cancelled and some 2,700 stranded passengers were asked to check with other airlines to get to their destinations. The government activated contingency plans and issued a statement seeking to offer reassurances about the consequences for the local economy.
“We have run out of time and have unfortunately not been able to secure funding for the company,” Chairman Skuli Mogensen said in a letter to employees. “I will never be able to forgive myself for not taking action sooner.”
Mogensen had been working furiously over the past months to save the airline he founded in 2011, holding talks with potential rescuers including larger rival Icelandair and US private equity firm Indigo Partners. Wow bought time when bondholders agreed to convert debt into equity, and the airline reportedly proposed a $160 million turnaround plan.
Failed Talks
Wow had earlier said it was in the “final stages” of raising new equity from a group of investors, telling passengers flights had been postponed until “documentation with all parties involved have been finalised.”
Along with Icelandair, Wow has played a key role in Iceland’s decade-long boom in tourism, which is now the country’s biggest export.
The closely held airline carried 3.5 million passengers last year. Its crisis has weakened the krona, triggering cabinet meetings that saw Iceland’s government rule out a rescue using taxpayers’ money.
Visitors to Iceland are set to drop this year for the first time in a decade, according to the operator at Keflavik International Airport. Stefan Broddi Gudjonsson, an economist at Arion Banki, said the Wow Air debacle would cause tourist numbers to drop by around 16 percent in 2019.
“This announcement comes at bad time for the Icelandic tourism sector, which is now preparing for the high season,” Gudjonsson said.

Economic Impact
Arion is now predicting a 1.9 percent drop in gross domestic product as a result, although his colleague Jon Bjarki Bentsson at Islandsbanki was less gloomy.
“The krona has already weakened some 11-12 percent, and measures have already been taken both within the companies and by the government to react, should this would happen,” Bentsson said.
Finance Minister Bjarni Benediktsson has already said the government is prepared to consider measures to bolster the industry.
Wow Air’s collapse takes the number of European airlines that have failed since last summer to at least eight.
Belgium’s VLM announced its liquidation in August, when Switzerland’s Skywork Airlines AG also ceased flights. The German arm of Small Planet filed for insolvency in September, with Azur Air halting operations in the country, and Nordic leisure carrier Primera Air collapsed on October 1.
Most recently, Berlin-based leisure carrier Germania and UK regional airline Flybmi ceased operations last month.