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Wow Air sets course for $300m IPO
Owner and founder plans to sell less than half of the company through listing
Iceland’s Wow Air is aiming to raise $200m-$300m in an initial public offering of the low-cost, long-haul airline within 18 months, according to its chief executive and owner.
Skuli Mogensen, who founded Wow in 2011, said he would expect to raise that figure by selling less than half of the company, but he did not give a valuation for the whole business.
The airline, which offers cheap flights to the US via its Iceland hub, has had a difficult couple of years: it lost $27.5m before tax in 2017 with revenue of $486m and expects to lose $6m this year. Mr Mogensen said he hoped it would return to profit in 2019 with revenue of $830m-$840m. This is in contrast to the rest of the industry, which had record profits in 2017 thanks in part to low jet fuel prices.
Mr Mogensen conceded that the airline had not managed to keep down its costs: “Fuel clearly has worked against us, we’re not hedged. We are reconsidering that policy.” At the end of August jet fuel had risen to $92 a barrel, up a quarter compared with a year ago.
But he said his focus was on raising ancillary revenues— such as charges for extra legroom to in-flight meals — which stood at $57 a person, up from $42 in January 2017. “The margin on that kind of growth is 95 per cent versus network growth. This is our way of competing efficiently against the largest carriers,” he said. Mr Mogensen added that he wanted to increase the figure to $65 in the next year.
Wow’s local rival Norwegian has pioneered this “unbundling” of air fares by paring them back to the seat and offering optional extras, but Mr Mogensen said Norwegian was “deviating” from its “hardcore low-cost model” by including services such as in-flight entertainment and Wi-Fi.
Wow ranks poorly with some flyers, however. AirHelp, a business that makes it easier for consumers to claim compensation for delayed or cancelled flights, ranks it bottom out of 72 global airlines based on punctuality, quality of service and ease of processing compensation claims. Mr Mogensen told news channel CNBC in June: “We have to do better. It’s obviously in our interest to fix it.”
The airline recently launched flights between New York and Delhi in India via Iceland, which Mr Mogensen said was both direct and tapped into India’s fast-growing travel market.The airline had $154m in long-term borrowing, according to its 2017 accounts, most of which had rates of up to 8 per cent, high for the sector.