Wow Air ceased flying on Friday of last week following frantic efforts to re-finance, leaving thousands of passengers stranded.

The budget Icelandic carrier operated from Gatwick, Stansted and Edinburgh in the UK and elsewhere in Europe offering cheap flights to Iceland and North America via Reykjavik.

Wow advised passengers “to check available flights with other airlines” and told those who paid by credit card “to contact their credit card company”.

The carrier sold overwhelmingly direct but advised passengers that those “who bought their ticket as part of a package tour are protected by the Package Travel Directive [and] are advised to contact their travel agent to arrange an alternative flight”.

The decline of Wow Air, founded in 2011, was rapid. As recently as last September, Wow founder and chief executive Skuli Mogensen was pursuing plans to raise $300 million though a stock market listing of less than half the airline.

But the hard reality of Europe’s aviation market caught up with it as a price war and overcapacity have driven a growing number of smaller airlines to the wall.

Wow announced it had been taken over by creditors in the middle of last week following agreement on a debt-for-equity swap by bondholders. But it was just the latest in a series of proposed takeovers that came to nothing.

Mogensen had sold the bonds for €50 million last autumn to raise cash. The carrier reported it owed three times that when it folded.

Icelandair appeared ready to acquire Wow late last year but pulled out of the deal in November.

Then US private equity investor Indigo Partners stepped in to rescue the carrier. It pulled out on March 21 having said it would invest “up to $75 million” in Wow, about half what the carrier owed.

The failure of the deal when Indigo is a serial investor in budget carriers – including Wizz Air in Europe, Tiger Airways in Singapore, Spirit Airlines and Frontier Airlines in the US, and Volaris in Mexico – suggests Wow had problems the investor deemed insurmountable.

Wow immediately announced it was back in talks with Icelandair, only for the Icelandic flag-carrier to walk away a second time on March 24.

Four of Wow Air’s 11 aircraft were grounded at the start of last week – two held by an aircraft lessor in Miami and Montreal and one at Keflavik Airport. A fourth aircraft was grounded for maintenance.

The carrier had already cut its fleet from 24 to 11 aircraft and ceased flying to the US West Coast.

However, its UK website was still offering flights from Gatwick, Stansted and Edinburgh to Reykjavik and on to destinations including New York, Boston, Washington, Toronto and Montreal last week.

Mogensen said: “We wanted to use Iceland as a global hub connecting three continents.” He blamed the failure on a decision to order expensive long-haul aircraft in 2016.

But the airline made serial mistakes – crucially, failing to hedge on fuel costs when the oil price rose last year, an error Mogensen acknowledged last September “clearly worked against us”.

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