The Icelandic finances airline Wow Air abruptly shut down in March, leaving passengers stranded world wide — and now it seems the airline’s demise might have tanked Iceland’s economic system.
Wow Air’s chapter has had such a damaging impact on Iceland’s tourism sector that the nation’s economic system, which was beforehand estimated to develop by 1.8 p.c, is as an alternative on observe to contract by 0.4 p.c, Bloomberg experiences. The Icelandic central financial institution, which launched these figures on Wednesday, stated the “deterioration within the financial outlook has brought on the inflation outlook to vary markedly in a brief time period.” The nation’s unemployment charge is now anticipated to hit 3.9 p.c in 2019, the financial institution revealed, and Bloomberg experiences that the Icelandic krona’s worth has declined by 3.7 p.c up to now this 12 months.
See more: Iceland airline out of business
The aftershocks of Wow Air’s chapter spotlight how reliant Iceland has develop into on tourism. Greater than 2 million folks visited the nation final 12 months, and throughout the top of Iceland’s traveler growth in 2015, the tourism sector made up one-third of the nation’s economic system, in accordance with the journey web site Skift. Consultants had been predicting the nation’s tourism growth would finish even earlier than the Wow Air collapse — 2018 solely noticed a 5.5 p.c uptick in vacationers from the earlier 12 months, in comparison with a 24 p.c enhance in 2017 — however the airline’s shuttering appears to have made issues worse.
In March, the airline ceased all operations as a result of it had successfully run out of money. Earlier that week, it claimed it was within the “last phases” of a funding spherical and instructed passengers flights can be delayed till “documentation with all events concerned has been finalized.” However the cash by no means got here, and tons of of passengers world wide had their flights canceled.
“We now have run out of time and have sadly not been capable of safe funding for the corporate,” the airline’s chair Skúli Mogensen stated in a letter to workers that was obtained by Bloomberg on the time. “I’ll by no means be capable to forgive myself for not taking motion sooner.”
Wow Air’s collapse might have had devastating results on Iceland’s economic system, but it surely additionally isn’t too stunning. Wow was the eighth European airline to have failed for the reason that summer season of 2018. Finances airways have lengthy struggled with a mixture of fluctuating gas prices, overcapacity, and a continent-wide fare conflict. As Aditi Shikrant defined in October, after the Danish finances airline Primera Air shut down and declared chapter, low-cost carriers develop into extra precarious as they develop their buyer base, since their margins are decrease than these of pricier carriers.
For now, the Icelandic central financial institution appears cautiously optimistic concerning the nation’s financial future. “Though the financial contraction shall be difficult for households and companies,” the financial institution introduced, “the economic system is way more resilient than earlier than.”
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