Many airlines have been undone by ambitious expansion plans, and while Wow Air is profitable now, extra planes mean extra costs. Can a small carrier like Wow Air survive in a sector that is moving toward further consolidation?
Tiny Wow Air has big plans.
Skúli Mogensen, the founder and CEO of the Icelandic low-cost carrier, wants to double the number of passengers flying with the airline from to six million by 2020, but to do that he might need some help.
Mogensen, who still owns the company outright, is eyeing rapid expansion. The airline is getting its hands on four widebody A330neos, allowing it to fly much greater distances than it currently does.
“To find a partner than can help us achieve that strategically rather than just a financial partner, could make a lot of sense,” he told an audience earlier this week at World Travel Market London.
Morgensen’s phrasing indicates he might seek an airline partner, although in a separate interview with Reuters he suggested an IPO was another option.
Wow Air has had interest from investors in the past, Morgensen said, and given the airline’s profitability there would likely be plenty of interest from Europe’s big groups.
Flying With A Difference
Launched in 2011, It’s not just Wow Air’s purple livery that helps it stand out. Morgensen has been determined to do things differently.
He sees Wow Air as a technology, rather than a transport, company and wants it to be “the first airline in the world where ancillary revenue surpasses the per seat revenue.”
This means that Wow Air would generate more money from selling extras, such as luggage, car hire and hotels, than from the actual base ticket price.
At the moment, the company collects $53 per passenger in ancillaries and is targeting “north of $60” next year.
These low upfront fares also mean that the airline is capable of creating a market where other airlines might not think there is one. It is also happy to leave airports that don’t work out such as Bristol in the UK.
Wow Air will soon start flying from the Icelandic capital of Reykjavik to U.S. cities, including Cleveland, Cincinnati and St Louis. Not routes you would think were necessarily big profit centers.
The strategy in flying to these secondary destinations is that they are not on the east coast, which Moregnsen said is getting very crowded because of a new generation of narrowbody jets that can fly much further. Norwegian is already experimenting with routes between small airports in the UK and U.S., such as Edinburgh to Connecticut/Hartford-Bradley.
“As a result, going into next year you will see a number of new destinations from us [that are] a little bit further inland, a little bit further east and west,” Morgensen said.
Something Wow won’t be doing in 2018 is spending money on inflight entertainment. On its website, the airline states that it doesn’t offer anything other than “the thrill of sitting high up in the sky and enjoying the flight.”
“I don’t think inflight entertainment system is a money maker for anyone – if you take the cost of the installation weight and everything else,” Morgensen said.
Photo credit: Skúli Mogensen, founder and CEO of Wow Air, speaking at World Travel Market London this week. Mogensen said the airline could look at outside investment to help it expand. World Travel Market