The odds are stacked against Wow Air having a long-haul life

Cantillon: Unless the Icelandic carrier can raise money, it risks joining a list of airlines that have folded in recent years

 Skuli Mogensen, chief executive of WOW Air, with cabin crew members at the Paris Air Show in 2017.  Photograph: Pascal Rossignol/Reuters

Skuli Mogensen, chief executive of WOW Air, with cabin crew members at the Paris Air Show in 2017. Photograph: Pascal Rossignol/Reuters

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Plenty of people in aviation wish Wow Air’s founder, Skúli Morgensen, well, but agree that it may not be long before the Icelandic airline succumbs to its current problems.

Wow flew into financial turbulence in the autumn. Rising fuel costs, increased interest rates and falling fares squeezed cash flows, hindering its ability to meet liabilities as they fell due. Unless the carrier can raise money, it risks joining a list of airlines that have folded in recent years.

Unfortunately, two opportunities to do this have already passed. Larger rival Icelandair decided against buying Wow this week. At the same time, a deal to sell aircraft to an aviation financier and lease them back, releasing about €22 million, also fell through. The airline says it is pursuing “other opportunities” but won’t reveal what they are.

Wow is building a “low-fare, long-haul” franchise by offering cheap flights from Europe, including the Republic, to Iceland’s main airport, Kevlafik, and from there to various north American cities. The low fares should compensate for the layover, or alternatively, travellers can take a few days in Iceland before continuing on their way.

Low fares, not low cost

Industry insiders argue that the approach is “low fares” rather than “low cost”. They say long-haul flying does not offer the sort of savings that the likes of Ryanair can squeeze from measures such as turning craft around quickly in order to work them harder and boost productivity. There isn’t even the same scope for haggling over charges with airports.

This leaves others with ambitions to grow budget long-haul businesses, including Irish-registered Norwegian Air International, facing similar difficulties. However, that does not rule out the probability of someone hitting the right formula.

The chances are it will be an operation with the financial and market muscle to get favourable terms from manufacturers and financiers for new fuel-efficient aircraft, while being able to hedge extensively against oil price rises and keep a lid on other costs. All of which points to a more established player succeeding on this front rather than someone relatively new to the industry.

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