Iceland: Icelandair and WOW announce merger

WOW Air, the Icelandic budget airline that shook up the US market with Europe fares as low as US$99 one way, will be acquired by rival Icelandair in a deal that could make the company a strong force in the trans-Atlantic market.

The acquisition must still be approved by Icelandair shareholders and by regulators.

Icelandair stated the brands will continue to operate independently, but the tie-up could bring restraint to competition that has flooded the US market with new capacity on the two Icelandic carriers.

WOW Air has opened more than a dozen new routes to North America since 2015, with Icelandair often matching its rival’s plans. That’s led to a sudden surge in some markets where nonstop flights to Iceland proliferated practically overnight.

Bloomberg reports the WOW Air deal to be worth around US$25 million, based on a US$455 million valuation of Icelandair. WOW Air’s shareholders will be barred from selling any newly received Icelandair stock for six months with half of the shares subject to an additional six-month moratorium.