What To Know About The Wow Air Shutdown

Icelandic budget airline Wow Air stopped flying Thursday, saying efforts to raise capital to keep the airline flying had stalled.

The airline, which flies distinctive purple jets, raised money through bonds in the fall, but told bondholders shortly after it was seeking additional financing.

The airline launched in 2011 and was known for offering flights from places like Detroit and and New York to Iceland or Europe for as little as $99.

Mounting Troubles

The company reported late last year it was under pressure and losing money because of high fuel costs and was in talks to be acquired by Icelandair Group, but those talks collapsed in November. The New York Times reported this week  another agreement that had been in the works, an effort to get an investment from private equity firm Indigo Partners, fell apart and an effort to restart discussions with Icelandair has so far failed.

Wow sold four airplanes out of its fleet of 20 and returned some to leasing companies, but still didn’t have enough cash to continue operations.

The collapse follows other failures of European low-cost airlines. Latvia and Denmark-based Primera folded in October and filed for bankruptcy. Other budget airlines in Switzerland, Belgium and Germany have recently folded as well.

What About The Passengers?

The Icelandic government announced Thursday it was putting an emergency plan in place to help more than 2,700 stranded passengers, with help from Icelandair and EasyJet. Hungarian budget airline Wizz Air also said it would help passengers with so-called “rescue” fares. Air industry observers said those who booked flights with credit cards may be able to get their money back.

United Continental Holdings Inc UAL and American Airlines Group Inc AAL have offered to help stranded passengers.

By the time it shut down, Wow had cut flights from Iceland to four U.S. cities: Boston, Detroit, Newark and Baltimore.

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Photo credit: Anna Zvereva, Flickr