Icelandair has agreed to buy rival Icelandic airline WOW air from its founder for about $18 million in an all-share deal aimed at creating a stronger global competitor.
The acquisition is subject to, approval by Icelandair Group's shareholders, the approval of the Icelandic competition authorities and a due diligence. The shares will amount to 5.4% of Icelandair Group's stock. Mogensen, who will receive 272 million shares in Icelandair as part of the deal, said that the deal will strengthen its worldwide competitiveness.
While the two companies will continue to operate as separate brands for now, fans of Icelandair may be wondering whether the affiliation with Icelandair will lead to improved conditions on the no-frills WOW, or whether WOW will eventually drag Icelandair down into its yes-we-will-charge-you-for-water hell. The acquisition creates opportunity for both companies to become even better prepared to provide global carriers with strong competition in the worldwide airline market. There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals. "The Icelandic travel industry is a lynchpin of the Icelandic economy and its important that air transport to and from the country is in sure hands".
Wow Air, meanwhile, was reportedly on target to make a financial loss in its current financial year.
Skúli Mogensen, founder and CEO of WOW Air, stated: "I'm very proud of our success and what we at WOW Air managed to build up in the last years, and I'm also grateful for the fantastic reception we've had since the very first day". We have created a strong team that has reached remarkable success and has been a pioneer in low cost flights across the North-Atlantic.
WOW's founder and sole owner Skuli Mogensen, who will receive 272 million shares in Icelandair, said that the deal will strengthen its worldwide competitiveness.
Icelandair Group's shareholders will vote on the deal in the coming days. The meeting will take place in no more than three weeks time.