What Budget Travelers Can Learn from Iceland’s Wow Air Collapse

The collapse of Iceland’s Wow Air

Iceland’s Wow Air went out of business practically overnight this week after failing to secure necessary investments to keep it afloat. Thousands of passengers found out over Twitter, some only receiving vague texts or emails from the airline saying flights were delayed or cancelled due to “operational restrictions.” They were handed back their bags and other airlines quickly moved to offer discounted tickets to those who were stranded.

Wow Air CEO Skuli Mogenson was interviewed by Business Insider in January about the financial turmoil the company was facing after a failed merger, resulting in layoffs of over 100 employees and its fleet cut by almost half. Wow Air saw profits each year following its launch in 2012 until 2018 hit, when it began to make moves away from the single-fleet, low-cost operational model. These were all signs that things were not going well for the Icelandic carrier – but most travelers don’t check stock prices and financial reports before booking tickets.

The collapse of Primera Air

This is not the first time a budget airline has caused passengers turmoil in the last year. While it was a much smaller airline, Primera Air shut down just as dramatically in October 2018 after ambitiously offering one-way transatlantic flights for just $99. These flights started off poorly in April of 2018 because of production shortfalls for its fleet of Airbus A321neo aircrafts. The operator had to lease a different set of functional – and expensive – aircrafts to take off on-time. Things went downhill from there and, just six months ago, passengers were similarly left stranded.

What budget travelers can learn

This all begs the question: can budget airlines still be trusted? Do those of us with a frugal spirit still have the option to travel without breaking the bank? To answer these questions, let’s take a look at the similarities between these two collapses.

Primera Air’s dive into $99 transatlantic flights was the start of its downfall. If you are experiencing a little deja-vu when you read that figure, you aren’t alone. Wow Air famously offered transatlantic airfare from the United States to Europe starting at just $49 one-way. Your best friend from college likely posted the link to it on Facebook, and it sounded far too good to be true.

For Primera Air and Wow Air alike, it was. The rising price of jet engine fuel and the lowered cost of economy fare across major operators like Delta and American, the model simply was not sustainable. Because these major airlines have added revenue from business and first class pricing, they can continue to offer lower fares for those in economy. Primera Air and Wow Air did not have that same source of revenue. For Wow Air specifically, all the trips from the US into Iceland at a budget price point were bound to take a toll. Pair that with a failed merger and a step too far from the single-carrier, low-cost operating model, it comes as less of a surprise that they collapsed overnight.

Budget transatlantic travel isn’t sustainable – yet

Back to our initial question: can budget airlines still be trusted? The answer is yes, to a degree, but not yet on a transatlantic scale. There will still be typical bumps in the road, like the Ryanair pilot roster mix-up that caused flight cancellations for more than 400,000 passengers back in 2017. However, this carrier and others like it have been highly successful in offering budget fare to countries in a close vicinity.

If you’re heading to Europe this summer, I wouldn’t deter you from taking advantage of low-cost flights from Paris to Brussels. I would caution you, when transatlantic airfare seems too good to be true, it likely is for the time being. The moment a sustainable low-cost model rises to the top, I will be on the first flight out of here.

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