Wow Air Hf has gone out of business, stranding thousands of passengers and creating potentially huge risks for Iceland’s tiny economy and its growing reliance on tourism, Bloomberg News reported. The discount carrier is the eighth European airline to have failed since the summer as margins are pinched by fluctuating fuel costs and over-capacity that’s sparked a continent-wide fare war. Wow’s demise should bring short-term relief to local rival Icelandair Hf.
Iceland
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Iceland is living up to its reputation as a land of fire and ice. Burnt fingers and cold shouldering are risks for bondholders in Icelandair. The ratio of debt to earnings has risen, and with it the risk of default on more than $200m of borrowings. With the flow of tourists that powered the airline’s growth slowing down, it is time for Iceland’s oldest airline to scale back its ambitions, the Financial Times reported. What apter way to commemorate the tenth anniversary of the financial crisis than with debt restructuring talks? Three Icelandic banks collapsed back then.
The Lehman Brothers bankruptcy threw the United States into an epoch-defining financial storm. Imagine 300 of them going bust at once. That, in relative terms, is what Iceland endured a decade ago during its banking crisis, which on this rugged island steeped in myths of gods and giants is now known as "hrunid" — the collapse.
Just as Iceland looks back at a decade of recovery since its financial and economic collapse, the north Atlantic island is once again grappling with an existential challenge for one of its key industries, Bloomberg News reported. Tourism and the foreign cash it provides was instrumental in digging the 340,000-person nation out of its deep hole. Now, the industry is cooling fast and problems are mounting for its airlines after years of rapid expansion. Rewind to 10 years ago, and a similar tale could be told about the nation’s banks.
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My understanding of Iceland proved dated and left me ill-prepared for what greeted me upon arrival: a booming economy, one that has been greatly transformed from the depths of the crisis. Growth has topped 4 percent in each of the past three years and the economy is forecast to expand 3.3 percent this year, according to data compiled by Bloomberg. How Iceland recovered from one of the most traumatic shocks experienced by any nation during the financial crisis is worth reviewing, a Bloomberg View reported.
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Failed Icelandic bank Kaupthing is pressing ahead with a stock market listing of its domestic arm Arion, people close to the matter said, a key step in Iceland's rehabilitation in the global financial system, Reuters reported. Kaupthing, once a major international bank, went into administration and its domestic operations were separated into Arion Bank in 2009. Iceland became the first western European country in more than three decades to be bailed out by the International Monetary Fund.
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Administrators for failed Icelandic bank Kaupthing are looking to sell off British high street retailers including Coast, Oasis and Warehouse which employ thousands of people, four sources familiar with the matter said. The bank was nationalised during Iceland's 2008-2011 financial crisis, with its domestic operations spun into a new bank known as Arion Banki, while all non-Icelandic assets remained with the now defunct Kaupthing. Kaupthing acquired the brands in 2009 from Mosaic Fashions, which went into administration after shareholder Baugur collapsed in the wake of the crisis.
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Good times are rolling again in Iceland. In June it beat England in a football match. On The Economist’s “glass-ceiling index”, it is the world’s best country for working women. And the economy is purring. After a thumping crash in 2008-09, GDP is expected to grow by 5% this year, faster than any other rich economy. The ruling (conservative) Independence Party has been rewarded: it won 30% of the vote in the election in October, more than any other party. But some fret that Iceland’s economic stability is, again, built on molten lava.
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