Skift Take
Wow Air is being squeezed from all sides. It will need to reinvent its business if it wants to survive. The good news is that the company's founder and CEO, Skúli Mogensen, is willing to take some risks.
When entrepreneur Skúli Mogensen started a new low-cost airline based in Iceland in early 2012, the space was ripe for disruption.
U.S. and European airlines, many newly profitable after a harsh recession, had little interest in thwarting a new entrant with gaudy branding that charged for everything, from larger carry-on bags to sodas. Moreover, Mogensen's airline, called Wow Air, didn't have much low-cost competition across the Atlantic, as Norwegian Air was a smallish European operator then. Perhaps better, Iceland, a newly hot tourist destination, had limited service to the United States, including just one U.S. legacy carrier flight— New York to Reykjavik on Delta Air Lines.
At first, it worked as planned. Wow Air expanded to the United States in 2015, and established players generally left it alone. It skimmed passengers from the bottom of the market, filling aircraft with cost-conscious travelers. Some flew to Iceland for vacation, while others stopped in Reykjavik to save some money on a transatlantic journey. It wasn’t the most comfortable of flights — Wow Air has struggled with operational reliability and customer complaints — but it was cheap.
It's a different market now. In the past year, U.S. and European carriers, which didn’t take the short-haul, low-cost threat seriously in the 1990s and early 2000s, have begun competing vigorously against transatlantic discounters. Mostly, legacy carriers fear Norwegian, as it's considerably larger than Wow, which has only about 20 aircraft. But Wow has been caught in the fray, with big airlines dropping prices in its transatlantic markets.
Wow Air's point-to-point franchise — flying passengers from the United States and Europe to Iceland for vacation — is also under stress. Iceland remains a popular tourist destination, but airlines have probably added more capacity than the country can support. Wow Air's chief domestic competitor, Icelandair, has grown massively recently, and U.S. and European airlines have added flights. (Icelandair's CEO resigned last month, taking blame for what has proven to be an unprofitable growth approach.)
For Mogensen, the timing is n
