CLEVELAND, Ohio -- Icelandair, which launched service from Cleveland this year, is buying rival Wow Air, the other Iceland-based airline that, until last month, also flew out of Cleveland Hopkins International Airport.
The purchase, announced Monday morning, may not have much of an effect on Cleveland, given that Wow had already decided to quit the Cleveland market. Its last flight from Hopkins was in late October.
If anything, it may strengthen Icelandair, which has been in a competitive battle with Wow in recent years for market share, particularly in the United States.
In a statement, Icelandair said both airlines would continue to operate under existing brands.
"The acquisition creates opportunity for both companies to become even better prepared to provide international carriers with strong competition in the international airline market," according to the statement. The airlines' combined share of the transatlantic market is about 3.8%.
Both airlines started flying from Cleveland in May, in a move that raised some eyebrows among industry observers. Could Cleveland -- which hadn't had transatlantic service in nine years -- support two carriers offering nonstop service to Iceland?
Though the two companies have different business models, they both use Keflavik International Airport near Reykjavik as a hub to funnel travelers to and from elsewhere in Europe.
Wow is what's known as an ultra-low-cost carrier, with rock-bottom basic fares and add-on fees for extras like advanced-seat assignments, baggage and more.
Both airlines felt the crunch of competition this year, particularly as fuel costs increased. Icelandair's CEO resigned in August, after a disappointing second-quarter earnings report. Wow recently issued $70 million in bonds to refinance debt and fund future operations.
Seth Kaplan, managing partner of Airline Weekly, said the competition took its toll. "Sometimes you have a situation that's just unsustainable. You can't fly all over the world for $99 forever, especially with fuel prices where they are."
Kaplan said he thinks the merger is probably good news for Cleveland, because it will help Icelandair regain its footing.
Last month, Icelandair announced it was reducing its service in Cleveland to the busy summer months. The airline had originally intended for its Cleveland-to-Reykjavik route to be year-round.
At the same time, Wow announced it was completely ending service from Cleveland, Cincinnati and St. Louis. In an interview with USA Today, Wow CEO Skuli Mogensen said the carrier was planning to focus on larger North American markets and new service to India.
Kaplan said any airline merger brings a mix a good and bad, for both employees and customers. In the case of Wow and Icelandair, he said: "I think it's probably more good than bad."