This week Icelandic discount carrier, WOW Air, folded. Passengers, aircraft, and employees were left stranded across destinations when the airline ceased operations. While WOW Air was part of the cheap Trans-Atlantic flight revolution, it won’t go away simply because they did.
WOW Air Gave Plenty of Warning Signs
Sometimes the skeptics are right.
Plenty of naysayers expressed their doubts regarding the unthinkably cheap flights from WOW Air and their competitors like Norwegian Air Shuttle, Primera – two of the three now defunct. Iceland Air jumped in to examine the possibility of acquiring the carrier but decided against it. Then Indigo, parent company to Frontier, nearly bought the brand but pulled back in the end. That was personally disappointing, as the carrier had stakes in Wizz Air (Polish LCC), Volaris (Mexican LCC), Frontier and would have been able to bridge those markets with WOW.
Iceland Air has been disciplined through the challenge from WOW, avoiding the deep discounts but joining in on scalable expansion. If they didn’t want to buy their only direct competitor, and Indigo pulled out too – the books had to have been appalling.
Norwegian Air Shuttle Could Be Next
While we are on the topic of long-haul LCCs failing, Norwegian Air Shuttle has rebuffed investments from British Airways parent company, IAG. Their financial challenges have been more visible than WOW’s. Norwegian failing would not come as a surprise, they have pursued a number of angles including flying into New York JFK on any aircraft they could, Newark and Stewart-Newburgh.
Norwegian has been a little bit wiser in switching strategies from “growth to profitability.” That strategy shift has included shutting down some smaller airports like Stewart and Providence, Rhode Island and increasing prices though not to level of the trans-Atlantic market ten years ago.
Mainline Carriers Have Adjusted
The market has moved and mainline carriers have shifted their business model to compete with LCCs both at home and abroad. United and peers offer Basic Economy across the Atlantic to put up a fight instead of pulling out capacity from the market. Emirates and others are expanding their fifth-freedom flights to continue to feed the market with more capacity.
TAP Portugal, a Star Alliance carrier, is one of the most reliable one-way mainline carriers offering consistently affordable flights, especially in business class. Emirates flies Newark to Athens on a heavily contested fifth-freedom route as well as Milan to JFK, both of which they routinely offer $799 all-in fares for two people.
Mainline carriers will keep airplanes full rather than drastically return prices to pre-LCC days and ceding market share to competitors old and new.
Other Discounters Will Fill The Gaps
Before WOW Air there have been dozens of fallen business models for trans-Atlantic traffic. Business-only airlines and LCCs have come and gone bridging Europe and North America. Others have attempted to bridge Asia and Europe like the recently defunct Air Belgium or the otherwise very successful Air Asia who closed their long haul flights to Paris among others.
Advancements in fuel consumption and the extended range of new equipment like the 737 Max when it returns to service and the A321 LR will make it easier to start than in the past. WOW Air had just a handful of aircraft and at the time of closing serving few destinations. WOW symbolizes the long-haul LCC industry and their collapse is much more exaggerated than the true effect of a few planes coming off of very well beaten paths.
The question is who will fill the gap and how quickly?
What do you think? Is WOW’s closure the sign of a bigger problem? Is the affordable trans-Atlantic fare party over? Or is this just poor management in a very tough industry with a very tough model?