I SERVED on the Board of Directors of WOW Air from early 2016 until August 2018. During that time, I appreciated the dedication, smartness, and commitment of its CEO, Skuli Mogensen, and learned how interesting the WOW Air business model was. The real advantage that Iceland's fascinating geography gave WOW Air initially worked well, but the long-haul, low-cost airline faced five key challenges that ultimately caused its demise: Airline costs tend to rise because both the staff and the airplanes get more expensive as they age. Over its first few years of operation, WOW Air should have seen significant drops in its unit cost of production due to its fast growth. By spreading fixed costs over a quickly increasing base of operations, total costs would rise less than the rate of capacity growth. However, WOW Air continued adding costs at the rate of its growth or higher, effectively squandering the cost benefit it was reaping from the fast growth.
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