Icelandair shares surge 50% at announcement of competitor Wow Air's new acquisition

Icelandair has announced the acquisition of its main rival, the low-cost airline Wow, to allow the two largest Icelandic airlines to strengthen their global presence.

The $ 18 million, stock-only transaction was announced Monday and will have to be approved by shareholders and Icelandic competition authorities before it becomes official, according to a statement from the two companies announcing the deal. # 39; s acquisition. Icelandair and Wow plan to continue to operate as separate brands once the transaction is approved.

While both carriers are locomotives within their home country, Iceland, they account for only a combined 3.8% share of the transatlantic travel market, according to Icelandair.

"The acquisition offers both companies the opportunity to be even better prepared to provide international carriers with strong competition in the international airline market," the statement said.

Wow was founded in November 2011 and currently serves 36 destinations in North America, Europe and Asia. The carrier offers a no-nonsense approach to traveling, allowing it to sell rates as low as $ 55 between the US and Europe. Guests pay additional fees for seat selection, checked baggage, food and beverages.

Icelandair, the country's flagship airline, was founded in 1937. In the 1960s, it introduced a stopover option that allows travelers between North America and Europe to make stopover in Iceland without paying extra fare.

Icelandair Group's shares, traded on the Nasdaq Iceland Stock Exchange, jumped nearly 50% after the announcement.

The agreement comes as some European carriers are in the process of consolidation. Last year, Lufthansa and the low cost carrier EasyJet acquired shares of Air Berlin. IAG, the owner of British Airways, took a 4.6% stake in Norwegian Air earlier this year and did not hide its intention to buy the discount carrier. Alitalia, the Italian national company, is also looking for a lifeline after filing for bankruptcy last year.