Icelandair buys WOW air, creates a powerful competitor
Icelandair's purchase of its low-cost Icelandic competitor WOW air was a surprise, but reflects considerable industrial logic. Both offer Europe to North America connections via their Reykjavik hub and both have grown rapidly. Icelandair is a full-service carrier, whereas WOW air is a low-cost airline. The two overlapped on 19 routes, representing 49% of Icelandair's seats and 70% of WOW air's seats this summer. They will have a very high combined share of Icelandic capacity but in a European context, Icelandair had only 0.3% of all seats touching Europe in summer 2018 and WOW air had just 0.2%. Strong competition, rapid growth and rising fuel prices have weighed on both airlines' financial results. This deal should help both to better profitability at the same time as creating a more sustainable competitive force on the North Atlantic.
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