Since its founding in 2011, WOW Air has fought Icelandair, the country's flagship, for the business of the island nation. That the competition has come officially. On Monday, Icelandair announced that it has agreed to acquire the original Icelandic ultra-low cost supplier.
"Icelandair Group has entered into a share purchase agreement to buy all shares of the airline's WOW air," the carrier said in a statement.
In the agreement, WOW Air's shareholders will receive a 5.4% stake in Icelandair. Reuters estimates the agreement of 18 million dollars. However, Bloomberg reports that the WOW Air agreement should be worth around 25 million dollars, based on a value of $ 455 million on Icelandair. WOW Air's shareholders will be blocked from selling any newly acquired Icelandair shares for six months, with half of the shares subject to an additional six-month moratorium.
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"WOW Air has built a strong brand in recent years and has had great success on the company's markets to and from Iceland and across the Atlantic," says Icelandair CEO and CEO Bogi Nils Bogason in a statement. "There are many opportunities for synergies with the two companies, but they will continue to operate under their own brands and operating approvals."
Headed by Founder and Managing Director Skuli Mogensen, WOW Air has become known among value-added travelers for its bottom floods and flashy fuschia rays.
The seven-year airline made headlines in the last couple of years with the sale of transatlantic flights of $ 55 and $ 70.
"I am very proud of the success and development we have had at WOW Air in recent years and I am grateful for the response we have received since our very first flight, "Mogensen said in a statement. "We have created a strong team that has achieved remarkable success and has been a pioneer of low-cost aircraft across the North Atlantic."
In an internal email obtained by Bloomberg, Mogensen explained to his employees that part of his reasons for selling to Icelandair was due to the tough market conditions.
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Both Icelandic airlines had worn this year due to high fuel prices, a decline in tourism to Iceland, and increased low cost competition. With the acquisition of WOW Air, the merged company would hold 3.8% of the transatlantic market. However, airlines will continue to function as their own brands.
Icelandair operates a fleet of Boeing 737, 757 and 767 aircraft, while WOW Air only airs the Airbus A320 family and A330 family jets.
Icelandair's acquisition of WOW Air is still subject to approval from Icelandair Group investors, Icelandic antitrust authorities and due diligence.