Nov. 5, 2018, © Leeham News: The announcement that Icelandair will acquire competing low cost airline WOW Air seemed the inevitable conclusion to the financially-strapped WOW, which aggressively expanded against the entrenched incumbent.
The combined carriers may help Airbus and hurt Boeing in current campaigns to sell the A321LR/XLR and NMA to Icelandair.
The combined carriers will serve 63 cities from their home base in Iceland. Icelandair serves 46 cities. WOW serves 40 and recently announced expansion to its 41st, Vancouver.
There will be 19 common cities and routes (see Chart).
WOW has been struggling financially, following rapid route expansion. It operates an all-Airbus fleet of 20 aircraft, comprised of the A320 family, including the new A321LR about to come on line; and the A330-300. It has four A330-900s on order.
The privately-held company has been losing money, according to documents filed with Iceland’s equivalent to the UK Companies House. It’s struggled to obtain new financing.
WOW began operations in 2012.
Icelandair is an all-Boeing operator, with three dozen aircraft in service. The 757 and 767 have been the backbone of the airline. It’s adding the 737 MAX 8/9 and one 787 to the fleet.
It was founded in 1937.
Both airlines follow the LCC business model. For long-haul service, each offers wide, recliner seats in lieu of a lie-flat business class.
Icelandair said that WOW will be operated under its own brand. Mergers and acquisitions often follow this, at least initially, while integration, systems combinations and personnel matters are sorted out.
Alaska Airlines initially said Virgin America would be operated as a separate brand, without an end date. Eventually officials acknowledged the two airlines would become one. Today, the airlines operate under the Alaska certificate and all systems are integrated, but there are still Virgin-branded airplanes flying the Alaska system.
This may prove the case one day with Icelandair and WOW.
There seems little reason to operate two brands indefinitely. Nineteen routes overlap. Maintaining two certificates and systems only add to costs.
The WOW Airbus fleet gives the all-Boeing operator Icelandair the opportunity to compare operating costs and, in the case of the Icelandair 767s that are aging, the chance to one day replace these with the WOW A330s.
Icelandair’s 757s are also aging. The new 737 MAX is replacing the 757 on many routes, but the MAX is both shorter-ranged and has less capacity than the 757.
WOW is just about to introduce the A321LR into the system. Days before the merger announcement, the airline revealed it will begin service to Vancouver (BC) with the A321LR.
Airbus salesmen have been pitching the A321LR and A321XLR to Icelandair, noting it has better range and more capacity than the 737-8 and 737-9 the carrier has on order.
Boeing targeted Icelandair as a customer for the prospective NMA, aka 797.
Icelandair officials haven’t been ready to proceed to a decision on either airplane any time soon.
With the acquisition of WOW and the Airbus operating data that comes with it—rather than numbers pitched by Airbus that are always subject to debate—Icelandair now has hard information to evaluate.
As for Boeing, the NMA is a paper airplane at this stage, and one for which decisions over materials and configuration still are fluid.
This acquisition may well work to Airbus’ benefit and to Boeing’s detriment.