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Aviation: Europe's low-fares map changing again?

Lifeline for WOW?

Not too long after The Aviation Oracle posted yesterday's piece about WOW air’s troubles and Icelandair walking away from a proposed takeover, things changed again. On November 29 the Phoenix, USA based private equity firm Indigo Partners stepped in, signing a preliminary agreement to invest in the struggling Icelandic ultra-low fare carrier. The value of the deal has not been disclosed but Skúli Mogensen, WOW air’s CEO and main shareholder, is expected to remain a significant investor. Indigo is no stranger to the market, as it already holds substantial interests in Frontier Airlines and Spirit Airlines in the USA, Volaris in Mexico, and Hungary’s Wizz Air.

Bill Franke, managing partner of Indigo made a statement in which he said: “WOW's management and employees have done a remarkable job in creating a well-regarded, successful ULCC brand. We have a strategic vision for the airline, and look forward to working with its employees and agents to deliver that vision.”

Although the deal is subject to completion of due diligence, Mogensen was upbeat when the announcement was made: “The demand for low-cost air service continues to expand rapidly worldwide, and with Indigo as a partner, we hope to take full advantage of this highly attractive market segment.”

The troubles at WOW air had started to have a knock on effect. Its difficulties were being blamed for a notable drop in the Icelandic currency, and the firm’s handling agent at Reykjavik had announced layoffs involving almost 50% of its staff. Indigo has previously turned around US ULCC Spirit Airlines, and its acquisition of WOW should preserve the brand and is likely to improve prospects for its staff and Iceland's economy.

The deal – assuming it progresses to completion – offers the interesting prospect of Indigo's brands in Europe and North America being linked by a purple-coloured bridge across the north Atlantic. The company also has a backlog of some 400 Airbus narrowbodied aircraft on order, some of which could now potentially find their way to Iceland.

Joon to disappear?

In another rather abrupt change of direction, the new CEO of Air France / KLM looks to be intent on ditching the conglomerate's Joon brand after only a year of operation. Joon launched in December 2017 and was meant to have a ‘youthful’ style. It was not a true low-cost carrier but designed to feel like one. It was intended to attract millennials, and its aircraft interiors were configured to appeal to families. Earlier in November it launched the ‘Cosy Joon’ which enabled banks of seats to be converted into comfortable play and sleeping areas.

Aircrew working for the airline-within-an-airline worked longer hours and were paid less which helped to reduce costs to a degree. However, similar concepts including Delta Air Lines’ Song and United Airlines’ TED failed to deliver significant success as they were - like Joon - saddled with many higher legacy costs from the main business while taking attention away from the parent. Others, such as Qantas’ JetStar and Air Canada rouge, that are run separately from their parents and have stand-alone air operators certificates (AOC), have fared better.

Joon may be reintegrated back into Air France KLM (photo BriYYZ)

Joon is currently flying seven Airbus A320s, five A320s and four long-haul A340s. Smith still has to present his recommendation to the board, but if idea is approved and the brand is closed the fleet and employees are likely to be re-integrated into Air France’s mainline operations.

Text © The Aviation Oracle

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