Icelandair Group has signed an agreement to buy its low-cost rival Wow Air for nearly US$18 million, according to reports.

Both carriers have faced challenging financial situations, with Icelandair asking bondholders for a waiver after it admitted breaching debt promises, according to Bloomberg. Wow Air had reportedly been considering a sale following successive poor performances.

The airlines will continue to operate under separate brands and will have a combined 3.8 per cent share of the transatlantic market, according to Reuters.

Wow Air, founded in 2011, specialised in low-cost flights across the Atlantic via hub at Keflavik airport, but announced recently it would begin cutting some American routes. Icelandair has been operating similar routes focused on the business market.

Bogi Nils Bogason, CEO of Icelandair Group, said: “Wow has in recent years built a strong brand and achieved considerable success in their markets, to and from Iceland and over the Atlantic. There are great opportunities for streamlining but the companies will continue to run in their own respective ways under their own brand names and air operating licenses.”

Praising his team and employees, Skuli Mogensen, founder and CEO of Wow Air, added: “We’ve now begun a new chapter for Wow Air which gets the opportunity to grow with a strong backer in Icelandair, which will strengthen Wow Air’s foundation further in international competition.”

The deal has yet to be approved by Icelandair Group’s shareholders but is expected to be passed within three weeks.;

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