Last week, the inevitable happened, as Wow Airlines announced that it was ceasing operations. It happened overnight, as passengers woke up to a notice on the website. Over 1,000 passengers were stranded and advised to ask for “rescue fares” from other carriers. Here’s what we know:
Wow was an “ultra-low cost carrier (ULCC),” a la Spirit Airways or Ryan Air. You got a ridiculously low fare, but paid for everything else. Seat assignment? Pay. Bag? Pay. Can of Coke? Yup, you’ll pay. Needless to say, customer service was minimal.
The airline has been on the ropes for a while, particularly after a buyout from Icelandair fell through. Plane sales helped raise short-term cash, but that was only a stopgap. Bottom Line: If your airline is offering $100 international fares, it’s probably a good idea to keep up with the news.
- The ULCC model is a very difficult one, particularly when you have several competitors. Managements never think so, of course. Their attitude is that the major airlines simply can’t match them, and thus, will choose not to compete. Majors, however, have history on their side. The last thing that they want to do is let a tiny competitor become a big one, so they try to squash the upstart in its early growth phase. And, truthfully, it’s pretty easy for a large carrier to do. If you’re Wow, and you only have a few planes, every single route matters. On the other hand, if you’re British Airways, Wow flights only represent a percent or two of your total competition. Thus, it’s easy to match them on those routes without doing much damage to your overall financials. Consumers who have a choice of Wow or a major carrier at the same price will always choose the latter.
- It’s a tough situation for Iceland: Tourism represents 10% of Iceland’s overall GDP and has been growing at double digit rates this decade. Wow flew 30% of the tourists in Iceland, which means that not only has 30% of the capacity gone but the other 70% will become more expensive, as Icelandair no longer has an ULCC competitor.
- Passengers shouldn’t expect any help from Wow: I’ve seen articles in which stranded passengers complained that there was no one at the Wow Air desks to help them. Well, of course not. The employees had just been told that their employer was shutting down. It’s unlikely that they would stick around. Still, they may have some recourse. Anyone who purchased with a credit card should be able to get their money back from their credit card companies. But that doesn’t get them a ticket home. It only reimburses them for the cost of the ticket from Wow. Of course, many credit cards offer travel insurance, although it’s not as comprehensive as it once was. That insurance may offset part or all of the cost of travel. And finally, many large carriers, like United and American, will offer “rescue fares”. These are significantly reduced last-minute rates to stranded passengers. But with planes flying almost full these days, it’s not going to be easy for passengers to find a lot of spare seats.
Bottom Line: Rock-bottom fares are nice, but low prices can cost you in other ways. Be aware of what you’re getting.
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