Reykjavík Grapevine - 12.04.2019, Blaðsíða 12

The Reykjavík Grapevine and most of
Iceland have been watching the strug-
gles of WOW Air since last year as it
scrambled to find investors. But time
ran out in late March and the plucky
purple airline has gone out of business.
The brainchild of Icelandic tech entre-
preneur Skúli Mogensen, WOW is the
second Icelandic airline to file for bank-
ruptcy in less than a year—Primera Air
collapsed in October 2018.
Over 1,000 people lost their jobs
when WOW tanked, amounting to the
single largest layoff in Iceland’s history.
Arion Bank estimates the bankruptcy
could cause more than a 15% reduction
in visitors to Iceland in the short term,
but that there will be no long-term
impact.
Human cost
The weeks leading up to WOW’s
collapse were characterized by chaos,
with investors repeatedly showing
interest and then backing out and
talks of a partial buy-out by Icelandair
coming and going.
On March 27th, a deal looked to be
within reach and workers went to sleep
cautiously optimistic. But with mount-
ing debts, including to the company
from which WOW leased their aircraft,
March 28th marked the end.
WOW Air’s 1,100 employees and
contractors met the same fate as their
former coworkers who were let go in
December of last year. The ground
services company Airport Associ-
ates gave notice to their employees as
well—a layoff that could be avoided if
other airlines can quickly fill up the
void left by WOW’s departure. Workers
at the Duty Free and other shops at the
airport also lost their jobs.
WOW passengers were left stranded,
given only a few hours’ notice of their
flights’ cancellations. Some passengers
claim to have not been contacted at all
by WOW, and either read about the
airline’s closure in the news or upon
turning up to check-in for their flight.
The shock, frustration, and anger were
visible when the Grapevine interviewed
travellers at Keflavík International
Airport on March 29th.
Economic ripples
According to state broadcaster RÚV, the
demise of WOW is disproportionately
affecting companies outside the capital
region. They have seen many cancel-
lations from foreign tour providers
for the summer holidays. The tourism
industry in those regions is seasonal
and operators are smaller. They cannot
easily withstand a significant disrup-
tion to their high season.
In the capital , the
Sónar Reykjavík music
festival was cancelled
because many artists and
attendees were booked
on WOW. Many interna-
tional fans are cancelling their trips
to Iceland as a result; there have been
many Airbnb cancellations.
The failure of WOW poured a
bucket of cold water on labour talks.
Unions were preparing for a general
strike but accepted the latest compro-
mise proposed by the state mediator.
The VR union agreed to pay its laid-
off members’ wages because payday
was only a few days away and the wait
period for unemployment benefits is
going to be long due to volume.
Flashbacks
A detailed autopsy of the airline is still
a ways off, but a general plotline has
emerged since the airline surrendered
its operating license.
WOW Air was founded in 2011. It
rose from the ashes of IcelandExpress a
year after Eyjafjallajökull halted flights
across Europe and put Iceland on the
map for many. Skúli Mogensen used
his tech money to buy up the assets of
the failed enterprise and the rebranded
carrier took off quickly.
At its height, WOW Air carried more
than a third of passengers travelling to
or through Iceland. Its sudden absence
is a huge, disruptive hole in the indus-
try, but an irresistible opportunity for
competitors. Within days, Icelandair
announced it was leasing new planes
and increasing service. It intends to
expand even more once its new Boeing
737 Max 8 planes are cleared to fly.
Dutch airline Transavia applied for
some of WOW’s slots and will start
operating in July after jumping regula-
tory hoops. Hungary-based Wizz Air is
also going to increase service, includ-
ing daily flights to London. Coinciden-
tally, Wizz’s owners, Indigo Partners,
twice negotiated to buy a stake in WOW
Air.
From the ashes
Many observers have pointed out
the similarities to the collapse of the
island’s banking sector in 2008. Like the
banks that preceded it, WOW was led by
executives with little to no knowledge
or experience in the industry—only
instead of fishermen running banks, it
was nerds directing planes. WOW and
the banks grew far too fast with high
levels of debt. WOW was profitable in
its first few years when it emulated the
proven strategies of airlines such as
Ryanair. In recent years, however, the
company pivoted to long-haul routes
and tiered seat classes. The overexpan-
sion included failed routes to India and
Israel. Hatari will have to make a trans-
fer on route to Eurovision in Tel Aviv.
Skúli invested 4 billion
ISK of his fortune in the
venture; he may now lose
everything, including
his house. The company
has started bankruptcy
proceedings and its assets
will be liquidated. Authorities hope to
keep the property in Iceland.
Despite the epic—and still ongo-
ing—failure, Skúli has made moves
to launch a new airline, meeting with
investors, applying for an airline oper-
ating licence and even coming up with
a tentative name for the new endeav-
our: NewCo. WOW Air lost 22 million
ISK last year, so NewCo may be a hard
sell despite Skúli’s acknowledgment of
poor strategy and financing.
Nature Abhors A Vacuum:
In The Wake Of WOW
Another Icelandic industry overreaches
Words:
Kolbeinn Arnaldur
Dalrymple
Main Photo:
Vísir/WOW
You will not find Orbital on this plane. Or anyone coming to Iceland, for that matter
“WOW Air lost
22 million ISK
last year.”
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