WOW Air Begins Its Final Chapter

Maybe I’m calling this one a bit early, but it looks like the brightly colored purple planes of WOW Air are very quickly going to become a memory.  On Friday, they announced that their most recent attempt to attract a buyer (Indigo Partners, who has experience in the industry) had failed.

At the same time, they announced that they had entered talks with IcelandAir again.  They said that they expected those talks to conclude by today (Monday). I’ve been in the business world long enough to be able to translate this.  WOW Air is planning to have a major problem today or tomorrow.  They likely won’t be able to make payroll or are in danger of violating some loan covenants.  All of these things are really bad for passengers.

See, what happens in these situations is a bit of a death spiral.  Your credit card company wants to protect you.  If you file a claim saying you couldn’t take a flight because the airline went belly up, your credit card needs to be able to refund you. So, they hold back some money when they pay the airline.  When things look distressed, they hold back a bit more than normal, which means the airline has less cash to operate.  That makes the situation more dire.  See the vicious cycle?

Well, things are getting much worse for WOW.  According to Ben at One Mile at a Time, one of their airplanes was repossessed this morning. That meshes pretty much exactly with my expectations of how this situation to play out.  Expect it to get worse quickly.

The Final Two Pennies

If you have travel scheduled on WOW Air, I would seriously consider booking a backup ticket.  WOW is a low-cost airline, so I’m hoping you won’t be out much money.  And, your credit card company may make you whole.  But, you’re unlikely to be taking a flight on WOW Air anytime soon.  Unless we see evidence of a last-minute buyer soon, I fear this will be over quickly.

It’s sad to see low-cost carriers like this fail.  Primera Air is another one that went under last year.  And, Norwegian has been rumored to have financial troubles.  Losing Norwegian in the battle to keep prices down would be devastating.  Let’s hope that WOW Air is the last (likely) casualty for a while.

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