Icelandair buys WOW air

Iceland Monitor reports this news. This is going to be a big deal. Icelandair is a Boeing customer and WOW is an Airbus customer. Consolidation continues. The companies will continue to operate under separate brands. Their combined market share on the transatlantic market is around 3.8%. WOW's shareholders will, subject to conditions, receive an equivalent of 5.4% of Icelandair Group‘s shares - which hints to the discount on WOW as even that may drop. LCCs are under pressure, especially after the failure of Primera and the struggle at Norwegian. As the deal makes its way through the various approval processes, a big concern within Iceland will be protecting jobs. The small island gets more visitors than it has residents and this has helped it recover quickly from the financial meltdown that went from 2008 to 2011. Keeping its economy steady is going to be a concern as the airline consolidation is begun. In favor of the consolidation will be the argument that both airlines have developed Keflavik as a viable hub in the middle of the Atlantic. This has enabled both local airlines to connect North American and European markets with single-aisle aircraft. The action has become quite disruptive. Certainly disruptive enough that the US majors have reacted with their own services to Keflavik. Together the combined Icelandic airlines can focus their attention on external competition rather than each other. For example, both airlines do not have to serve Baltimore. Moreover, the Airbus and Boeing fleets can be aligned to optimize range and market size. Shorter ranges can exploit the MAX8 and A320neo, while the A321s and 757s can reach a bit deeper. The 767s and A330s and 787 can serve California to the west and Asia to the East. Indeed, a combined operation looks like providing the combined airline with a robust set of fleet options that ensures the "Iceland option" can keep disrupting markets to the west and east. And also keep Icelandic airline employees working.

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