Icelandic budget carrier Wow Air admits there are “some reservations” about its ability to operate as a going concern, but its directors believe the company will be successful in securing additional capital.
Wow Air has unveiled an operating loss of $35.5 million for the nine-month period to 30 September, compared with a previous loss of $4.1 million.
While flight revenues rose by 31% to $457 million the carrier has suffered from a 46% hike in aviation expenditure, to $405 million, particularly attributed to higher fuel prices.
Fuel costs continued to rise after the airline conducted a bond issue, and Wow says this has put “further pressure” on the company’s financial outlook.
Wow issued €60 million in bonds, as part of an overall €100 million framework, on 24 September.
The company’s cash and equivalents stood at $40.6 million at the end of September, compared with $5.3 million at the end of June.
But it told bondholders on 27 November that “external and internal” events, including “significant bad publicity” about its financial standing, had resulted in a “more negative impact” than expected on its sales, credit position, and cash-flows during the fourth quarter.
Wow says it has been “working diligently” to secure long-term funding, and – after prospective suitor Icelandair Group dropped out – it has reached a tentative deal with investor Indigo Partners.
This deal is contingent on completion of due diligence.
“The continuing viability of [Wow] and its ability to continue as a going concern is dependent upon the [company’s] being successful in its continuing efforts to access additional sources of capital,” it states.
“As a result there are some reservations on [its] continued going concern. However, the directors and [chief executive] believe that the [company] will be successful in the above matters.”