Icelandair abandons takeover of rival budget airline Wow

Skuli Mogensen, founder and CEO WOW air, Iceland's only ultra low-cost airline, announced Thursday that the airline will begin service to Iceland from Toronto and Montreal in May 2016. (CNW Group/WOW air)

Icelandair is dropping its US$18 million purchase of financially troubled Wow Air, a rival Iceland-based budget airline that touts cheap flights between the U.S. and Europe.

Icelandair Group said Thursday it's unlikely terms of the Nov. 5 deal could be met in time for a shareholder meeting scheduled for Friday.

Wow faces a challenging outlook as a stand-alone carrier. Earlier this week, it returned four planes to leasing companies in a move it called a necessary restructuring.

Airlines have faced pressure from higher fuel prices for most of this year until a very recent slide in oil prices.

Icelandair's interim president, Bogi Nils Bogason, calls the deal's collapse disappointing. Wow CEO and founder Skuli Mogensen says trying to pull off the deal in just a few weeks was ambitious.