airdoctor
Topic Author
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WOW Air financial trouble?

Thu Sep 13, 2018 10:30 pm

According to the Icelandic media wowair has been having trouble issuing new bonds to keep them going as there havent been any takers.

They have been going all over without luck so far and according to the media in Iceland the big three banks have turned them down so far.

Interesting to look at their numbers from their investor presentation.

https://kjarninn.overcastcdn.com/documents/WOW_air_Investor_presentation_Presound.pdf

The Icelandic media has also been speculating as Mr. Mogensen was spotted at the Icelandic competition authority with his lawyer on tuesday.

Could Icelandair be considering a takeover?

There have also been speculations that easyjet and lufthansa have been showing interest.
 
VS11
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Re: WOW Air financial trouble?

Thu Sep 13, 2018 10:53 pm

Just because 3 Icelandic banks have declined does not mean the company has financial problems. It could be that the banks already have exposure to the company or to the Icelandic aviation sector in general.
 
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SRQKEF
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Re: WOW Air financial trouble?

Thu Sep 13, 2018 11:36 pm

VS11 wrote:
Just because 3 Icelandic banks have declined does not mean the company has financial problems. It could be that the banks already have exposure to the company or to the Icelandic aviation sector in general.


Their equity is 4.5%, WOW seems to be in real trouble. And no, WW currently has no relationship with any of the banks AFAIK.

If you follow Icelandic media, the past week has been dominated by news that WOW's demise might be imminent if they don't meet their bond raising target. They've said they'll share the result of the bond sales tomorrow, and there haven't been positive noises around it.

I really hope WOW makes it, as they're an integral part of the Icelandic aviation sector and contributor to the economy, but I fear the worst. Simple maths in regards to their horrible equity situation, high aircraft leasing cost and low fares doesn't paunt a pretty picture.
Nothing compares to taking off in an empty 757 with full thrust!
 
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enilria
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Re: WOW Air financial trouble?

Thu Sep 13, 2018 11:39 pm

I don’t understand why the average airliners poster seems to hate competition so much. There’s thread after thread foaming about the hopes for elimination of a competitor through merger or liquidation.

So “there aren’t any takers” for bonds. That is a lie. There may not have been takers at the terms WOW proposed. The way bonds work is you offer debt and the buyer counteroffers an interest rate. If they cannot agree on a rate then there is no deal. This is simply a negotiation that did not lead to anything. These happen all the time.

It would be more interesting if instead of a private placement they floated bonds on an exchange. Then we could see what rates they would get.

I don’t doubt WW is unprofitable. People don’t seem to understand that fast growth means losses until at least critical mass. Losses in this stage don’t mean anything long term. The question is whether if when the growth slows they can start making money. It’s too early to know that.

As for a merger, they already stated they are open to a merger. I don’t want a competitor eliminated, but I expect this is what will ultimately happen.
 
Varsity1
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Re: WOW Air financial trouble?

Thu Sep 13, 2018 11:42 pm

enilria wrote:
I don’t understand why the average airliners poster seems to hate competition so much. There’s thread after thread foaming about the hopes for elimination of a competitor through merger or liquidation.

So “there aren’t any takers” for bonds. That is a lie. There may not have been takers at the terms WOW proposed. The way bonds work is you offer debt and the buyer counteroffers an interest rate. If they cannot agree on a rate then there is no deal. This is simply a negotiation that did not lead to anything. These happen all the time.

It would be more interesting if instead of a private placement they floated bonds on an exchange. Then we could see what rates they would get.

I don’t doubt WW is unprofitable. People don’t seem to understand that fast growth means losses until at least critical mass. Losses in this stage don’t mean anything long term. The question is whether if when the growth slows they can start making money. It’s too early to know that.

As for a merger, they already stated they are open to a merger. I don’t want a competitor eliminated, but I expect this is what will ultimately happen.


We don't hate competition.

We laugh at the latest and greatest people's express claiming to reinvent the wheel. More airlines fail than succeed. It's a tough, mature 100 year old business now, not the tech industry.
"PPRuNe will no longer allow discussions regarding Etihad Airlines, its employees, executives, agents, or other representatives. Such threads will be deleted." - ME3 thug airlines suing anyone who brings negative information public..
 
flyoregon
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Re: WOW Air financial trouble?

Thu Sep 13, 2018 11:45 pm

WOW came in to the market swinging and has done a fantastic job at stimulating the marketing and eliminating a virtual monopoly held by Icelandair. It would be a shame to see them go away if that were to actually happen.

When WOW starting growing as fast as they did, I feared that it would almost be too much too fast. I realize that a company may want to meet or outdo the competition by flying to more destinations, but it wasn't enough time for things to mature. I can appreciate the enthusiasm in their growth, but sometimes steady as she goes is vital in the airline business.
 
VS11
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 12:46 am

SRQKEF wrote:
VS11 wrote:
Just because 3 Icelandic banks have declined does not mean the company has financial problems. It could be that the banks already have exposure to the company or to the Icelandic aviation sector in general.


Their equity is 4.5%, WOW seems to be in real trouble. And no, WW currently has no relationship with any of the banks AFAIK.

If you follow Icelandic media, the past week has been dominated by news that WOW's demise might be imminent if they don't meet their bond raising target. They've said they'll share the result of the bond sales tomorrow, and there haven't been positive noises around it.

I really hope WOW makes it, as they're an integral part of the Icelandic aviation sector and contributor to the economy, but I fear the worst. Simple maths in regards to their horrible equity situation, high aircraft leasing cost and low fares doesn't paunt a pretty picture.


I really would not worry too much about WOW. All of their planes are leased. Worse comes to worst they will return some aircraft to lessors, cut some routes. TATL traffic is very seasonal and they are already subsleasing 3 aircraft for the 2018/2019 Winter. There is absolutely nothing worrisome about their model. Only red flag is competition with Icelandair. They have to figure out how to co-exist or otherwise they will be bleeding each other out. But if they can't raise the money to pay some leases, they will essentially curb their growth.
 
NWADTWE16
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 2:44 am

couldn't agree more with the RAH! RAH! for eliminating competition, makes me sick.

One interesting thing to me is an Easyjet takeover possibility. U2 has stated they want to get into Trans-Atlantic, and they are quite a success story already IMO. Perhaps Easyjet purchasing and then operating KEF as their hub, taking on all or most of WW route structure is not such a bad idea?
I haven't been everywhere, but it's on my list!
 
lavalampluva
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 3:06 am

IMO WW grew too fast too soon. They’ve stretched themselves pretty thin financially. I get a feeling those cheap fares are going to increase pretty soon.
Remind me to send a thank you note to Mr. Boeing.
 
smartplane
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 3:07 am

VS11 wrote:
I really would not worry too much about WOW. All of their planes are leased. Worse comes to worst they will return some aircraft to lessors, cut some routes.

Vital to be ahead of your financiers, because once you start breaching financial covenants, control has passed. Prematurely terminating a lease is usually a breach, unless by mutual agreement, or the terms permit. Premature termination can incur penalties, and a change in tax status.

A white knight already waiting in the wings?
 
VS11
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 3:09 am

NWADTWE16 wrote:
couldn't agree more with the RAH! RAH! for eliminating competition, makes me sick.

One interesting thing to me is an Easyjet takeover possibility. U2 has stated they want to get into Trans-Atlantic, and they are quite a success story already IMO. Perhaps Easyjet purchasing and then operating KEF as their hub, taking on all or most of WW route structure is not such a bad idea?


EasyWow! I like it! :-) They can have a shuttle between KEF and LGW to reach so many other destinations from easyjet’s LGW network.
 
VS11
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 3:31 am

smartplane wrote:
VS11 wrote:
I really would not worry too much about WOW. All of their planes are leased. Worse comes to worst they will return some aircraft to lessors, cut some routes.

Vital to be ahead of your financiers, because once you start breaching financial covenants, control has passed. Prematurely terminating a lease is usually a breach, unless by mutual agreement, or the terms permit. Premature termination can incur penalties, and a change in tax status.

A white knight already waiting in the wings?


Sure, breaking a lease involves a penalty but wouldn’t bankrupt the company. They are planning an IPO in a year or so I doubt they are close to a bankruptcy. Iceland is a small country so I wouldn’t rule out deliberate rumors/attacks to decrease confidence in the carrier and/or banks potentially linked to Icelandair sabotaging the debt issue. When Virgin Atlantic was a young carrier, it faced a lot of prejudice and dirty tricks and the UK is much bigger than Iceland.
 
slcdeltarumd11
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 3:38 am

Iceland is a tiny country ,Banks don't want too much exposure in any one sector. I don't think this seems like a big deal.
 
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spinkid
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 4:44 am

It is creating a ruckus in Iceland and because the bond issue is unclear caused their currency to drop. This article explains it quite well. These bonds are meant to give them liquidity until their IPO. It seems mostly to be a panic. This article explains how its failure could impact the economy drastically.

https://now.guidetoiceland.is/2018/09/1 ... sm-sector/
 
lavalampluva
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 5:55 am

slcdeltarumd11 wrote:
Iceland is a tiny country ,Banks don't want too much exposure in any one sector. I don't think this seems like a big deal.

Iceland doesn’t have an issue with jailing crooked bankers either.
Remind me to send a thank you note to Mr. Boeing.
 
Ryanair01
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 6:39 am

Being at the competition authority suggests to me they have finance from somewhere, but probably within the industry or tourism sector. Who really knows though.

Maybe Icelandair, but they've got their own problems. I'd have thought Wow might struggle to raise capital domestically.
 
ZuluTime
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 7:18 am

Mogensen was speaking at an aviation conference in London last week. I'm not sure what anyone else in the audience may have thought although my view is that the guy is absolutely busking it. He was asked by the interviewer whether he had to go for an IPO next year and his answer was that it would help with some of his suppliers! Clearly has issues there. The current bond offer will be difficult to place without any track record of profitability and an IPO would be impossible in the current market for the same reason. If he does get the bond offer away, it might give Wow enough cash for a year at the current rate of losses. They are then dependent on a further bond issue or an IPO and unless the losses have been turned around radically, neither is feasible. My impression was that they are stuffed either now or in a year's time, but stuffed all the same. His best hope is that someone else sees value in the business model and buys him out, sooner rather than later.
 
jamsco99
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 7:39 am

Wow has a terrible on time performance too. When my YUL-kef-lgw flight was delayed. The compensation I received was more than the ticket cost.
Surely all that compensation must be hurting their bottom line
 
airdoctor
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 8:53 am

According to the media in Iceland this morning they have a guarantee for ~50 million euros in new bonds. The media is also claiming that we will see issuance of new equity shares and a new key investor in the company. Could it be another airline?
 
workhorse
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 6:57 pm

enilria wrote:
I don’t understand why the average airliners poster seems to hate competition so much.


No, that's not true, you are being unfair to them! They only hate competition when it threatens carriers from their home country. ;)

enilria wrote:
As for a merger, they already stated they are open to a merger. I don’t want a competitor eliminated, but I expect this is what will ultimately happen.


I want the WOW brand to stay too. However, if there is a merger, EZY seems to be the best candidate, IMO. Their philosophy is quite similar (be a low cost carrier but treat your customer with dignity) and they both have something to bring to each other. WOW gives EZY a platform to start trans-atlantic ops and EZY can teach WOW how to run flights on time. :)

If EZY is really smart, they might even keep WOW brand and use it for all of their transatlantic or even longhaul operations.
 
drdisque
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 7:37 pm

The only mis-step I think WOW has made was the A330's too early so that they could access the "big (west coast) markets that FI couldn't reach".

The strategy wasn't bad. Just taking on a small fleet of widebodies for such a niche mission probably wasn't financially prudent for an airline that was still in its startup phase.
 
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SuperTwin
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 8:48 pm

Varsity1 wrote:
enilria wrote:
I don’t understand why the average airliners poster seems to hate competition so much. There’s thread after thread foaming about the hopes for elimination of a competitor through merger or liquidation.

So “there aren’t any takers” for bonds. That is a lie. There may not have been takers at the terms WOW proposed. The way bonds work is you offer debt and the buyer counteroffers an interest rate. If they cannot agree on a rate then there is no deal. This is simply a negotiation that did not lead to anything. These happen all the time.

It would be more interesting if instead of a private placement they floated bonds on an exchange. Then we could see what rates they would get.

I don’t doubt WW is unprofitable. People don’t seem to understand that fast growth means losses until at least critical mass. Losses in this stage don’t mean anything long term. The question is whether if when the growth slows they can start making money. It’s too early to know that.

As for a merger, they already stated they are open to a merger. I don’t want a competitor eliminated, but I expect this is what will ultimately happen.


We don't hate competition.

We laugh at the latest and greatest people's express claiming to reinvent the wheel. More airlines fail than succeed. It's a tough, mature 100 year old business now, not the tech industry.


+1

I can appreciate a well-run business that succeeds and is sustainable.

I can’t appreciate haphazardly run airborne philanthropic endeavours that are praised for stimulating the market while they work their way towards insolvency because they sell their product for a pittance... all this while the economy and air travel market are in pretty good shape by most measures.

No, they are not geniuses, they are dreamers that should lend an ear to their CFO before they up and leave, taking the rudder with them while the ship steams ahead towards the iceberg.
SuperTwin
 
arcticcruiser
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 11:20 pm

SuperTwin wrote:

+1

I can appreciate a well-run business that succeeds and is sustainable.

I can’t appreciate haphazardly run airborne philanthropic endeavours that are praised for stimulating the market while they work their way towards insolvency because they sell their product for a pittance... all this while the economy and air travel market are in pretty good shape by most measures.

No, they are not geniuses, they are dreamers that should lend an ear to their CFO before they up and leave, taking the rudder with them while the ship steams ahead towards the iceberg.


Need a like button here!
 
Lapplander800
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 11:40 pm

enilria wrote:
I don’t doubt WW is unprofitable. People don’t seem to understand that fast growth means losses until at least critical mass. Losses in this stage don’t mean anything long term. The question is whether if when the growth slows they can start making money. It’s too early to know that.
.


This is true... they key is having capital to finance the growth. Not having equity is less than ideal when running an airline. Most airlines need cash on hand to survive the winter months.

What probably doesn't help the owner is speaking loudly about how fantastically everything going, how lame his competitors are, and how big he is going to become, yet not releasing financials unless they suit him (there are laws...), until that very moment the coffers are empty.
At which point you get to issue bonds which takes 2-3 weeks longer than expected to close, with at least 9% Interest rate and a 20-25% discount for bond owners who participate in the IPO.
Now the only minor details is to become profitable.

Much agreed on the other bits. Healthy, and sustainable, competition is best for everyone.
 
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KanaHawaii
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Re: WOW Air financial trouble?

Fri Sep 14, 2018 11:55 pm

Well, on the other side of the airport, Icelandair is announcing a number of changes to its operations in light of lighter than expected revenue for the Summer.

This article from Airline Geeks spells it out what they need to do to change. If Icelandair is having to change up their operations, just think of what WOW is maybe having to do in order to make revenue.
https://airlinegeeks.com/2018/09/13/ice ... -schedule/
 
Gsasala
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Re: WOW Air financial trouble?

Sat Sep 15, 2018 12:42 am

workhorse wrote:
enilria wrote:
I don’t understand why the average airliners poster seems to hate competition so much.


No, that's not true, you are being unfair to them! They only hate competition when it threatens carriers from their home country. ;)

enilria wrote:
As for a merger, they already stated they are open to a merger. I don’t want a competitor eliminated, but I expect this is what will ultimately happen.


I want the WOW brand to stay too. However, if there is a merger, EZY seems to be the best candidate, IMO. Their philosophy is quite similar (be a low cost carrier but treat your customer with dignity) and they both have something to bring to each other. WOW gives EZY a platform to start trans-atlantic ops and EZY can teach WOW how to run flights on time. :)

If EZY is really smart, they might even keep WOW brand and use it for all of their transatlantic or even longhaul operations.

If wow is forced to merge I hope this happens. I think easyjet would be the best option
 
arcticcruiser
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Re: WOW Air financial trouble?

Sat Sep 15, 2018 11:48 am

airdoctor wrote:
According to the media in Iceland this morning they have a guarantee for ~50 million euros in new bonds. The media is also claiming that we will see issuance of new equity shares and a new key investor in the company. Could it be another airline?


Yet to be formally finalized, but news this morning in the Icelandic media that WOW air ows ISAVIA, the KEF airport operator around $20M. At least haf of it is overdue. So if there is this dept, how much else is there? Will the entire €50M disappear into such dept? Shades of Air Berlin and Monarch anyone?
Prolonged death with the occasional headline of having been saved?

http://www.visir.is/g/2018180919180/wow-sagt-skulda-isavia-tvo-milljarda-i-lendingargjold
 
AirbusOnly
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Re: WOW Air financial trouble?

Sat Sep 15, 2018 12:44 pm

WOW Air also owes ISAVIA, the Iceland Airport Authority, two billion krónur in landing fees.

According to this article:

https://www.mbl.is/vidskipti/frettir/20 ... id_isavia/

(Translation with Google Translator...)

The airline WOW air owes Isavia ohf. about two billion krónur in landing fees. Of that debt about half is already overdue. This simulates the newspapers of Morgunblaðið.

Thus, WOW air will not have paid landing fees at Keflavík Airport this spring. According to the newly published interim financial statements of Isavia, the company's domestic accounts receivable have increased by ISK 1,220 million since the beginning of the year. The claim amount is based on the business position of the company for ten weeks, or 30 June last year. It is not yet clear how Isavia intends to collect the debt of the airline.

When Morgunblaðið sought Isavia's response, they received answers that the company did not express themselves about the issues of its individual customers. When asked for a general solution to cases when airlines were in default of landing charges, the answer was that "Isavia works with the relevant companies to resolve cases in case of default on landing charges with the interests of Isavia as a guiding principle."

According to the newspaper Morgunbladid, Isavia is now working on implementing it in consultation with WOW air, how the debt will be settled with the company.

WOW air released a notice yesterday afternoon, announcing that a bond issue worth € 50 million would be completed on Tuesday next. No information has been obtained as to whether the funds raised by the issue will be used to settle the above-mentioned debt to Isavia, according to a discussion of WOW's problem in the Morgunbladid today.
 
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yeogeo
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Re: WOW Air financial trouble?

Sat Sep 15, 2018 1:03 pm

KanaHawaii wrote:
Well, on the other side of the airport, Icelandair is announcing a number of changes to its operations in light of lighter than expected revenue for the Summer.

This article from Airline Geeks spells it out what they need to do to change. If Icelandair is having to change up their operations, just think of what WOW is maybe having to do in order to make revenue.
https://airlinegeeks.com/2018/09/13/ice ... -schedule/


Caution: The author in the above link gets FI's Chicago schedule past and future completely wrong - I hesitate to give the rest of the information much weight.

"Chicago will also see a change, with the airline transitioning from a single daily flight on the 262-seat Boeing 767-300 to twice daily Boeing 757-200 aircraft. Instead of wing-to-wing service, as seen in the past in Chicago, there will only be one flight each in the two banks for flights, with plans to use the Boeing 737 MAX 8 on one of those two flights."

Nope: This past summer at ORD has seen double daily 752's, XMon/Wed, on which days we see a single 752. 763's only operated occasionally as a sub to O'Hare, the latest date being this past July. FI now has announced double daily flights starting mid May, both flights will operate with 752's (no mention of the MAX).
https://www.routesonline.com/news/38/ai ... f-06sep18/
 
normie999
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Re: WOW Air financial trouble?

Wed Sep 19, 2018 8:35 am

https://icelandmonitor.mbl.is/news/news ... ond_offer/

WOW air have completed their bond offer worth €60m - €10m still to be sold.
 
airdoctor
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 12:13 am

Great news and now I am just waiting on the EZY takeover.
 
VS11
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 12:48 am

normie999 wrote:
https://icelandmonitor.mbl.is/news/news/2018/09/18/wow_completes_bond_offer/

WOW air have completed their bond offer worth €60m - €10m still to be sold.


This will not be convenient for the narrative how WOW is not a sustainable business...
 
joeblow10
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 2:14 am

VS11 wrote:
normie999 wrote:
https://icelandmonitor.mbl.is/news/news/2018/09/18/wow_completes_bond_offer/

WOW air have completed their bond offer worth €60m - €10m still to be sold.


This will not be convenient for the narrative how WOW is not a sustainable business...


I find it very convenient. 9% on a bond? Practically the guaranteed average of the stock market for a bond? Shows there are serious doubts about their ability to repay in the end.

The landing fee issue (if true) is also huge... depending on if the airport/country ever decided to go after them.
 
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TheRedBaron
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 3:03 am

I hope they survive, they need to cut some routes and put more realistic fares, paying 130 USD one way from Texas to Iceland is ridiculous.

TRB
The best seat in a Plane is the Jumpseat.
 
davidjohnson6
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 5:27 am

Paying Euribor (with a floor of 0%) plus 9% as an interest rate is pretty high for a bond denominated in EUR (not ISK). This puts WOW well into high yield territory - with significant questions over debt repayment. The interest rate they are paying is roughly consistent with a credit rating of approximately CCC
 
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TOGA10
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 6:49 am

airdoctor wrote:
Great news and now I am just waiting on the EZY takeover.

I imagine U2 has their hands full with upcoming Brexit and their new Austrian AOC, getting licenses sorted etc. Also starting up TXL (Air Berlin partly take over) has taken up quite a lot of resources. It it might be a good fit, who knows!
Love flying, hate the alarm at 3 in the morning, love watching the sun rise at 5:30. It's all about compromises.
 
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SuperTwin
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Re: WOW Air financial trouble?

Thu Sep 20, 2018 10:38 am

joeblow10 wrote:
VS11 wrote:
normie999 wrote:
https://icelandmonitor.mbl.is/news/news/2018/09/18/wow_completes_bond_offer/

WOW air have completed their bond offer worth €60m - €10m still to be sold.


This will not be convenient for the narrative how WOW is not a sustainable business...


I find it very convenient. 9% on a bond? Practically the guaranteed average of the stock market for a bond? Shows there are serious doubts about their ability to repay in the end.

The landing fee issue (if true) is also huge... depending on if the airport/country ever decided to go after them.


Yikes.

Change is absolutely necessary now.
SuperTwin
 
arcticcruiser
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Re: WOW Air financial trouble?

Fri Sep 21, 2018 8:04 pm

From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.
 
sevenair
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Re: WOW Air financial trouble?

Fri Sep 21, 2018 8:30 pm

arcticcruiser wrote:
From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.


And I wonder if WOW will benefit from a €100,000,000 ‘loan’ from the Icelandic government like Air Berlin was. Are they up for election anytime soon?
 
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lightsaber
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Re: WOW Air financial trouble?

Fri Sep 21, 2018 8:39 pm

arcticcruiser wrote:
From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.

That is a bad deal for WoW.

I agree with the Air Berlin analogy...

They should have sold the company.

Lightsaber
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enilria
Posts: 9659
Joined: Fri Feb 22, 2008 7:15 pm

Re: WOW Air financial trouble?

Fri Sep 21, 2018 9:09 pm

lightsaber wrote:
arcticcruiser wrote:
From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.

That is a bad deal for WoW.

I agree with the Air Berlin analogy...

They should have sold the company.

Lightsaber

Does anybody know the implied default risk in a 9% rate?
 
Ryanair01
Posts: 441
Joined: Fri Dec 27, 2013 9:27 pm

Re: WOW Air financial trouble?

Sat Sep 22, 2018 7:46 am

enilria wrote:
lightsaber wrote:
arcticcruiser wrote:
From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.

That is a bad deal for WoW.

I agree with the Air Berlin analogy...

They should have sold the company.

Lightsaber

Does anybody know the implied default risk in a 9% rate?


I'm not sure, but after Icesave, where the Icelanders showed they're very good at taking foreign money just to keep it when they should pay it back, I'm not surprised to see a painful rate.
 
BestWestern
Posts: 8335
Joined: Fri Sep 08, 2000 8:46 pm

Re: WOW Air financial trouble?

Sat Sep 22, 2018 9:21 am

The bond document is very well written. It requires reading to page 27 to find an ebit number.

Last twelve months losses of $45m usd, excluding interest payments.
Yield of 3cents - (easyJet 7cents)
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mjoelnir
Posts: 8746
Joined: Sun Feb 03, 2013 11:06 pm

Re: WOW Air financial trouble?

Sat Sep 22, 2018 11:40 am

enilria wrote:
lightsaber wrote:
arcticcruiser wrote:
From Bloomberg
https://www.bloomberg.com/news/articles/2018-09-19/wow-air-ipo-plan-a-rarity-in-europe-s-barren-airline-market

Higher interest than Air Berlin... and we all know how that story went. Finnair aside top of the list appear to be the usual suspects.

That is a bad deal for WoW.

I agree with the Air Berlin analogy...

They should have sold the company.

Lightsaber

Does anybody know the implied default risk in a 9% rate?


It depends on in what currency the bonds are. The 1 day lending rate at the Iceland central bank is 6 % and for 7 days or longer 5 %. So 9 % would be quite normal for a bond in ISK.

Rates are high concerning the Icelandic Kroner, especially as the Icelandic Central stands heavily on the brake pedal, by both having a high discount rate and forcing the Icelandic banks to keep reserve money deposited at the central bank.
Iceland is one of the few countries were some bankers actually went to prison after the banking crisis and the current rules to protect against a recurrence would have a banker in some other countries crying.

If WOW should go down, the Icelandic government will only watch, perhaps mitigating the aftermath. No help for WOW to find there.
 
eaa3
Posts: 938
Joined: Mon Sep 10, 2007 4:49 am

Re: WOW Air financial trouble?

Sat Sep 22, 2018 12:04 pm

mjoelnir wrote:
enilria wrote:
lightsaber wrote:
That is a bad deal for WoW.

I agree with the Air Berlin analogy...

They should have sold the company.

Lightsaber

Does anybody know the implied default risk in a 9% rate?


It depends on in what currency the bonds are. The 1 day lending rate at the Iceland central bank is 6 % and for 7 days or longer 5 %. So 9 % would be quite normal for a bond in ISK.

Rates are high concerning the Icelandic Kroner, especially as the Icelandic Central stands heavily on the brake pedal, by both having a high discount rate and forcing the Icelandic banks to keep reserve money deposited at the central bank.
Iceland is one of the few countries were some bankers actually went to prison after the banking crisis and the current rules to protect against a recurrence would have a banker in some other countries crying.

If WOW should go down, the Icelandic government will only watch, perhaps mitigating the aftermath. No help for WOW to find there.


Sure, but it’s LIBOR + 9%.
 
davidjohnson6
Posts: 385
Joined: Mon Jun 20, 2016 10:10 pm

Re: WOW Air financial trouble?

Sat Sep 22, 2018 10:04 pm

The bond is in EUR not ISK. It's also Euribor+9% but Euribor in this bond issue has a floor of 0% so WOW never pay less than 9%. The bond matures after 3 years so one cannot even claim they get the benefit of long term borrowing or that the 9% refelcts the fact that long term interest rates tend to be higher most of the tine than short term rates.

This is a company which urgently needs cash (see the recent audited financial results) to pay day-to-day operational expenses and bond holders will likely find redemption of the bond is closely linked to whether an IPO is succesful in the next 36 months. It's a classic case of a high yield bond issue from a struggling company
 
Newbiepilot
Posts: 3639
Joined: Tue Aug 30, 2016 10:18 pm

Re: WOW Air financial trouble?

Sun Sep 23, 2018 1:42 am

I wonder how their financial situation is affecting airplane lease rates for WoW Air since their fleet is owned by a variety of lessors. Airplane lessors charge airlines with poor credit higher rates since their is higher risk of defaulting on the contract. High lease rates on their airplanes is part of what led to the demise of Air Berlin.
 
A380MSN004
Posts: 619
Joined: Sat Jun 03, 2017 9:07 am

Re: WOW Air financial trouble?

Sun Sep 23, 2018 5:12 pm

Newbiepilot wrote:
I wonder how their financial situation is affecting airplane lease rates for WoW Air since their fleet is owned by a variety of lessors. Airplane lessors charge airlines with poor credit higher rates since their is higher risk of defaulting on the contract. High lease rates on their airplanes is part of what led to the demise of Air Berlin.


Once contracted with a lessor, lease rates can change?
 
Newbiepilot
Posts: 3639
Joined: Tue Aug 30, 2016 10:18 pm

Re: WOW Air financial trouble?

Sun Sep 23, 2018 5:50 pm

A380MSN004 wrote:
Newbiepilot wrote:
I wonder how their financial situation is affecting airplane lease rates for WoW Air since their fleet is owned by a variety of lessors. Airplane lessors charge airlines with poor credit higher rates since their is higher risk of defaulting on the contract. High lease rates on their airplanes is part of what led to the demise of Air Berlin.


Once contracted with a lessor, lease rates can change?


WOW Air has been averaging one new plane every 3 months from a variety of lessors. I suspect they are constantly negotiating new deals. Airlines with poor credit are also more likely to be charged for a maintenance reserve.

The fundamental objective of a lease is to ensure that the payments do in fact cover the capital and financing costs of the underlying asset. Ultimately it is the lessor who carries. Any residual risks, consider the potential for a default – for example Bankruptcy where all current and ongoing costs must be met by the Lessee. (Maintenance Reserves are designed to build in protection)

Maintenance Reserves are intended to provide protection for the Lessor in respect of the Aircraft, Engine Propeller & Major Components. Taken together the funds currently allocated to Maintenance Reserves total many billions of USD. Maintenance costs are typically rising at a rate in excess of 3% / annum. Taken together the funds currently allocated to Maintenance Reserves total many billions of USD. Maintenance costs are typically rising at a rate in excess of 3% / annum.


https://sassofia.com/blog/aircraft-leas ... derations/

An Airline like Singapore Airlines or KLM is going to be able to negotiate out any maintenance reserve costs, since the probability of them defaulting and returning an airplane early in poor condition is low. An airline with poor credit will probably be paying higher maintenance reserves to the lessor, which may be the case with WOW Air
 
davidjohnson6
Posts: 385
Joined: Mon Jun 20, 2016 10:10 pm

Re: WOW Air financial trouble?

Sun Sep 23, 2018 7:26 pm

Just seen that buyers of the bond will be able to convert their holding into shares at IPO (quite common in companies that are trying to grow fast) but at a 20% discount to the price everyone else pays at IPO time. The choice of whether to convert or not is usually made by the bond holder (ie investor) and not the borrower (ie WOW Air). It sounds like that some fund managers are willing to buy into the 'growth' story that WOW Air is talking about

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