Icelandair announced on Thursday, November 29, it had scrapped its all-share deal to buy WOW Air that had aimed to create a stronger international competitor, sending its shares down 10%.
Privately-held Wow Air, which has been reducing the size of its fleet and announced its cash flow was under pressure due to stricter terms from creditors and lessors, stated it was looking at other opportunities but did not give details.
Scrapping the merger follows the collapse in October of Icelandic-owned and Copehagen-based Primera Air, highlighting intense industry competition that has also driven Air Berlin and Britain’s Monarch Airlines out of business.
The failure of the merger could also knock Iceland’s economy, which has become increasingly reliant on tourism. The central bank has expressed concerns about WOW Air’s financing have been weighing on the krona in recent weeks.
“The planned acquisition of Icelandair Group of WOW Air will not go through,” Bogi Nils Bogason, interim president and CEO of Icelandair Group, said in a statement. “This conclusion is certainly disappointing.”
