WOW Air will reduce its fleet by four aircraft as the Icelandic LCC reported that its financial situation had worsened in recent weeks.

The news comes as a deal announced Nov. 5, in which WOW would have been acquired by Icelandair, seems unlikely to happen. Icelandair said Nov. 26 that it was “unlikely that all the conditions of the share purchase agreement in relation to the acquisition of WOW Air will be fulfilled before the shareholder meeting” scheduled for Nov. 30.

Following the shareholders’ meeting, “Icelandair Group will present measures to strengthen Icelandair’s balance sheet further and submit a proposal to bondholders that is intended to achieve a long-term solution for Icelandair Group and bondholders.”

Attempts to reach Icelandair for comment on the implications of not fulfilling the conditions prior to the shareholders’ meeting were unsuccessful.

Meanwhile, WOW said Nov. 27 that it was downsizing its fleet by two Airbus A320-family aircraft and two A330-300s “in cooperation with its lessors.”

“This is a part of necessary restructuring of the airline and to ensure maximum utility of its remaining fleet,” the airline said in a statement. The slimming of the fleet would not affect its plans to start services to India, the company said.

WOW operates 17 A320-family aircraft as well as three A330-300s and has four A330-900s on firm order.

Since the airline’s Sept. 24 bond issue worth €60 million ($68 million), “a number of external and internal events have worsened significantly and the company is now working on securing its long-term funding,” the airline said. “During and following the bond issue, the company had significant bad publicity about the financial health of the company, which ended up having a more negative impact on the company's sales and credit position than anticipated. As a result, the Q4 results are materially worse than originally anticipated.”

WOW Air added that sentiment surrounding the company had worsened following the collapse of fellow LCC Primera Air in October.

“The company was until recently making progress with finalizing a sale-leaseback agreement, which has since been canceled, resulting in $25 million less inflow than originally planned,” the airline said.

These factors meant that WOW Air’s lessors, creditors and authorities had been monitoring the airline’s situation more closely “and demanded stricter payment terms than before, further putting pressure on the company’s cash flow.” 

WOW’s financial difficulties were also exacerbated by fast-rising oil prices after the bond issue. While the price of oil has subsequently dropped, “the impact on the company's position during these weeks has not recovered accordingly.

“With the above in mind we have been working diligently to seek additional funding and have received interest from a number of parties, including Icelandair as has been publicly announced.”

Alan Dron alandron@adepteditorial.com