Icelandair has backed out of its talks with rival Wow Air for a second time, leaving the troubled low-cost carrier in “advanced discussions” with bond holders to turn debt into equity.

Wow Air had only made the announcement that it was back in talks with Icelandair last Thursday after Indigo Partners decided not to pursue a proposed deal.

Icelandair had shown interest in buying the struggling carrier late last year, but it stopped discussions less than a month later, saying it was unlikely that Wow Air could meet the terms of the acquisition.

Now Wow Air says it is in talks with bond holders and creditors to reach “an agreement on a voluntary restructuring, including an agreement of converting current debt into equity and fund the company towards long-term sustainability.”

It says a further statement will be made later today (25 March).

The airline has cancelled several of its flights today, including its morning Gatwick-Keflavik route, though it is unsure if this is related to the carrier’s financial troubles.

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