Icelandair scraps plan to buy its rival WOW air, shares tumble

(Reuters) - Icelandair said on Thursday it had scrapped its all-share deal to buy WOW air that had aimed to create a stronger international competitor.

Shares in Icelandair tumbled 10 percent on the news, putting the stock on track for its worst day since August 2018.

"The planned acquisition of Icelandair Group of WOW air will not go through," Bogi Nils Bogason, interim president and chief executive of Icelandair Group, said in a statement.

Icelandair had announced on Nov. 5 that it had agreed to buy its Icelandic rival and had said conditions for the merger would need to be met by Friday, when its board was expected to recommend the merger to shareholders.

Icelandair, which did not give details about the conditions, said it had cancelled the plan because those terms were unlikely to be met by Friday's deadline.

Skúli Mogensen, the CEO of WOW air which has been reducing the size of its fleet, said: "It was clear at the outset that it was an ambitious task to complete all the conditions of the share purchase agreement in this short period."

Both Icelandic airlines use Iceland's Keflavik Airport as their main hub between Europe and North America. Together they have a combined 3.8 percent share of the transatlantic market.

Icelandair has lowered its guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) twice in 2018.

(Reporting by Tommy Lund and Izabela Niemec; Editing by Jan Harvey and Edmund Blair)