Skuli Mogensen, the former CEO of now-defunct WOW Air, is angry. He believes the collapse of his airline was avoidable.
In a letter to (now ex-) employees, Mogensen said:
I will never be able to forgive myself for not taking action sooner.
Speaking to the Financial Times, he pinned the problem squarely on WOW Air’s widebody acquisition in late 2016.
We wanted to use Iceland as a global hub connecting three continents…
To do that, WOW ordered A330s. But oil prices crept up in 2018, rising nearly to $100/barrel. That presented a far different model than $50/barrel oil in 2016.
In retrospect the wide-body decision unfortunately turned out to be fatal.
Even though WOW Air canceled future deliveries and returned the A330s already delivered, it was already too late.
We still had too much debt on our balance sheet and, given a very challenging airline environment at the moment, didn’t have the time to secure the funding needed.
How much debt? $150MN.
Five Reasons For Collapse, Not One
The problem was not one strategic blunder of buying A330s instead of sticking to narrowbody aircraft. Instead, there was a perfect storm of:
- A330 blunder
- High fuel costs
- Growing labor costs
To pin blame on the decision to acquire A330s and argue that alone caused a snowball of damage does not adequately factor in all the other elements that combined to force WOW Air to cease operations.
I was planning on flying WOW Air this summer and am very happy I did not book my ticket. For those who do find themselves stranded, many airlines are offering “rescue” fares to get you home or to your destination. But sadly the real loser will be Iceland, which has been propped up by unsustainably low fares for the last two years now. Look for a big tourist drop now that “free stopovers” enroute to Europe are no longer available via WOW.