This week, IcelandAir purchased its biggest competitor, Wow Air, for around $18 million in an all-stock deal. The two airlines will now have 3.8% of the transatlantic market, but will operate under their own brands.
Wow had been offering fares worthy of its name, with prices as low as $55 for international flights, perhaps the lowest of low-cost airlines with prices that would have been unfathomable even a few years ago.
“It’s never been as inexpensive in 2017 and 2018,” Scott Keyes of Scott’s Cheap Flights, a popular newsletter, told Yahoo Finance.
Low fuel costs, efficient planes, and heavy competition all worked together to bring costs down significantly and allow too-good-to-be-true prices to actually be true. All of a sudden, a transatlantic ticket for around $300 was possible — and common.
But with the recent uptick in fuel prices, the shuttering of Primera Air and other low-cost carriers, and now this acquisition, perhaps the cheap airfare party is winding down.
Without its biggest competitor racing to the bottom with headline-catching prices, IcelandAir is in a position to expand its margins — its stock jumped 50% on the news. Unfortunately for consumers, this could mean higher prices.
Wow and IcelandAir have been among the key transatlantic carriers providing exceptionally cheap tickets, and the consolidation will serve to further slow the race to the bottom, taking some pricing pressure off Norwegian and other low-cost airlines like Level, which is the low-cost brand of IAG, which owns British Airways and Iberia.
Super-low ticket prices may be coming to an end, but Keyes and analysts are still confident that affordable fares aren’t going anywhere just yet. With new aircraft from Boeing and Airbus that are far more efficient when it comes to fuel expenditure, new, cost-cutting computer systems, an à la carte business model, and a healthy appetite for cheap flights as the public has become accustomed to them, ticket prices that are low (but not ludicrously low) should still be available.