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Wow Air has shut down: Here's what went wrong

Business Insider logo Business Insider 3/28/2019 Benjamin Zhang

Video by USA Today

Icelandic ultra-low-cost carrier Wow Air announced Thursday that it has ceased operations effective immediately, stranding passengers around the world. The announcement comes after the airline failed to secure investment from Icelandair and private equity firm Indigo Partners.

Neither Wow Air founder and CEO Skuli Mogensen nor the airline's media team was available for comment. 

Since its launch in 2012, Wow Air has become known for its brightly painted purple planes, no-frills in-flight products and low prices. In some cases, Wow has been known to offer one-way flights between the US and Europe for as little as $49.

Mogensen, a former telecom entrepreneur, spoke with Business Insider in January about the financial and operational struggles experienced by the airline.

"We were profitable and successful as a single-fleet low-cost operator up until 2017," he said. "So really it's 2018 that was an abnormally bad year."

Read more: Wow Air CEO reveals his key mistake

During the first nine months of 2018, the airline's losses more than doubled to $33.6 million from $13.5 million from the same period in 2017 even as revenue surged by 31% to $501 million.

The airline suffered through a failed merger with its crosstown rival Icelandair followed by the layoff of 111 employees and the reduction of its fleet to 11 planes from 20.

According to Mogensen, much of the airline's problems stemmed from the addition of wide-body Airbus A330-300 jetliners to its fleet.

"One of the mistakes that I made, that Wow made in the last 18 months, was that we were moving away from the low-cost model," Mogensen said in the interview. "Most significantly we made our fleet structure unnecessarily complex with the addition of the wide-body A330 to our fleet." 

Wow Air launched with a fleet made up of narrow-body Airbus A320-family jets with 174 to 220 seats. The airline acquired three Airbus A330-300 jets with about 340 seats in late 2016 for flights to Asia and the West Coast of the United States.

"One of the core essences of the successful low-cost model is to ensure that you maintain a simple and coherent fleet structure because it will very quickly complicate the operations and therefore the costs if you have multiple fleet types," Mogensen said.

The presence of the A330s not only increased the airline's operating costs but also put pressure on Wow to fill the extra 120 or so seats for each flight. This hurt the airline's yields, Mogensen said. 

The Wow Air boss also said his company had strayed from the no-frills, low-cost business model it became known for and behaved more like a traditional airline.

"The second mistake we made and was in part because of the A330 was that we started behaving like a legacy carrier in the sense that we added a premium cabin," he said. "And again complicating our message, complicating our service delivery, complicating the marketing, and we are going back to our roots as a pure low-cost carrier." 

Unfortunately, Wow Air's attempts to correct course ran out of time and money.

a large passenger jet flying through a blue sky© Flickr / Nicky Boogaard

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