Home Business WOW Air CEO reveals what went wrong for his airline that forced...

WOW Air CEO reveals what went wrong for his airline that forced it to layoff 100 employees and dump half of its planes

98
0
SHARE
WOW Air CEO reveals what went wrong for his airline that forced it to layoff 100 employees and dump half of its planes

Since its launch in 2012, WOW Air has been a disruptive force in the trans-Atlantic airline market. The Icelandic ultra-low-cost carrier has become famous for its brightly painted purple planes, no-frills in-flight products, and insanely low prices. In some cases, WOW has been known to offer one-way flights between the US and Europe for as little of $49.

Unfortunately, WOW Air suffered through a difficult 2018 that included a failed merger with crosstown rival Icelandair followed by the layoff of 111 employees and the reduction of its fleet from 20 to 11 planes.

During the first nine months of 2018, the airline saw revenues surge 31% to $501 million, but losses more than doubled to $33.6 million from $13.5 million during the same period in 2017.

WOW Air founder and CEO Skúli Mogensen told Business Insider that much of the airline’s problems stem of the addition of wide-body Airbus A330-300 jetliners to its fleet.

“One of the mistakes that I made, that WOW made in the last 18 months was that we were moving away from the low-cost model,” Mogensen said in the interview. “Most significantly we made our fleet structure unnecessarily complex with the addition of the widebody A330 to our fleet.”

A WOW Air Airbus A330-300.
WOW

WOW Air launched with a fleet made up of narrow-body Airbus A320-family jets with 174 to 220 seats. However, the airline acquired three Airbus A330-300 jets with around 340 seats in late 2016 for flights to Asia and the West Coast of the United States.

Read more: The amazing story of how the Airbus A320 became the Boeing 737’s greatest rival.

“One of the core essences of the successful low-cost model is to ensure that you maintain a simple and coherent fleet structure because it will very quickly complicate the operations and therefore the costs if you have multiple fleet types,” Mogensen said.

The presence of the A330s not only increased the airlines operating costs, but it also put pressure on WOW to fill the extra 120 or so seats per flight. This hurt the airline’s yields, Mogensen said.

The A330s are currently in the process of being phased out of service with the airline returning to a single aircraft type fleet strategy built around the A320-family.

A WOW Air Airbus A321neo.
Airbus

Unfortunately, Mogensen confirmed that many long-haul destinations served exclusively by the A330, such as the West Coast of the US, will also be cut from WOW ‘s network.

The WOW Air boss also said that his company strayed from the no-frills, low-cost business model that made it famous and behaved more like a traditional legacy airline.

“The second mistake we made and was in part because of the A330 was that we started behaving like a legacy carrier in the sense that we added a premium cabin,” he said. “And again complicating our message, complicating our service delivery, complicating the marketing, and we are going back to our roots as a pure low-cost carrier.”

From the failed merger with Icelandair and the layoffs, Mogensen is hopeful that the difficult time will result in a stronger, more efficient and streamlined company.

WOW Air

The airline is in discussions regarding investment opportunities with the private-equity firm Indigo Partners, which owns the low-cost carriers Frontier Airlines and JetSmart.

According to Mogensen, WOW Air expects to be profitable again in the near future and will once again be in expansion mode in 2020. This time, as a single-fleet, low-cost operator.

“We were profitable and successful as a single fleet low-cost operator up until 2017,” he said. “So really it’s 2018 that was an abnormally bad year, so we’re confident that the original strategy worked so we’re going back to that.”

Read More

Leave a Reply