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WOW Air’s Collapse Has Hurt Iceland’s Economy

By Parker Diakite

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When WOW Air abruptly shut down in March, leaving passengers stranded around the world, no one could predict the impact it would have on Iceland’s economy.

Known widely for its $99 one-way flight deals to Europe from various cities in the United States, WOW Air helped Iceland turn tourism into a consistent stream of revenue. 

This was huge, considering Iceland was on the brink of a financial collapse a decade ago.

That economic boom, however, has slowed down and many say the demise of WOW Air had something to do with that decline.

Related Post: WOW Air Is Why You Shouldn’t Book Flights With Cash

More than 2 million people visited Iceland last year, and during the height of Iceland’s visitor boom in 2015, the tourism industry made up one-third of the country’s economy, according to Skift. Yet, experts warned there were early signs that the increase in tourism would end even before the WOW Air collapse.


In 2018, for example, tourism increased by approximately 5 percent from the previous year, compared to a 24 percent increase in 2017. The airline’s bankruptcy just sped things up.

Related Post: WOW Air Sends Rescue Flights After Planes Repossessed In Montreal And CubaW

Recently, the central bank announced they have cut its main interest rate by half a point to 4 percent. In addition, bank officials said the economy is now set to contract 0.4 percent compared with a previous estimate for growth of 1.8 percent, as reported in Bloomberg.

The bank also made revisions to its unemployment forecast for the remainder of the year to 3.9 percent from 3.1 percent and is predicting that inflation will peak at 3.4 percent in 2019 before declining to the 2.5 percent target over the next two years.

“Although the economic contraction will be challenging for households and businesses, the economy is much more resilient than before,” bank officials told Bloomberg. “Furthermore, monetary policy has considerable scope to respond to the contraction, particularly if inflation and inflation expectations remain close to the target, as is currently envisioned.”

WOW was the eighth European airline to fail since the summer of 2018.

Fluctuating fuel costs, overcapacity, and fare wars are factors that contribute to the struggle many budget airlines have, as reported in Vox.

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