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Wow Airlines' Bankruptcy Puts A Chill On Iceland's Tourism


The airline that helped introduce Iceland to the world has collapsed, and that is a big deal for Iceland. NPR's Jackie Northam brought us this story from Reykjavik.

JACKIE NORTHAM, BYLINE: Dozens of people bundled up against the cold stare into a bubbling pool of thick, dark liquid. This is Iceland's Strokkur geyser, about an hour and a half drive from Reykjavik.


NORTHAM: The Strokkur geyser erupts every five to 10 minutes, shooting a spray of hot water up a good 50 feet in the air.


NORTHAM: The Strokkur geyser is one of Iceland's more popular attractions, competing with the country's waterfalls and geothermal spas. A decade ago, there wouldn't have been a large crowd at the geyser. Back then, Iceland was considered off the beaten path as a tourist destination. That changed in large part with the creation of WOW Air. Erna Bjorg Sverrisdottir, chief economist with Iceland's Arion Bank, says WOW Air offered rock bottom prices, enticing passengers with a stopover in Iceland.

ERNA BJORG SVERRISDOTTIR: Their model was based on flying over the Atlantic to fly between Europe and North America. And I think a lot of people use the opportunity to stay here, as you say, for maybe a week or even longer.

NORTHAM: Sverrisdottir says the low-cost carrier helped pull Iceland out of a deep financial crisis that began in 2008. The country's banks had failed. Its currency collapsed. WOW Air began flying in 2011. There was soon double-digit growth in the number of tourists. And Sverrisdottir says Iceland's economy rebounded.

SVERRISDOTTIR: It went from being just a small industry in the country to becoming the largest export sector, amounting to 40% of our export revenues just last year. And I think WOW Air definitely played a large part in bringing these tourists to the country and help to build the economy.

NORTHAM: But then WOW Air got ahead of itself. The budget airline tried to expand too quickly, which sharply eroded profits. In March, WOW Air fell into bankruptcy. The number of tourists since then has dropped roughly 15% and is expected to fall further next year. Economists predict the country could see a recession. Gabriela Beck (ph), a supervisor at the Tourist Information Centre in Reykjavik, says there's uncertainty in Iceland about what the future holds.

GABRIELA BECK: I can feel that locals are afraid that the bubble is going to burst. There is a lot of new hotels, and I'm a little bit afraid that with the fall of WOW, that's going to affect those that are also still being built.

NORTHAM: But economist Sverrisdottir says, in fact, the established hotels are doing OK despite the WOW Air bankruptcy. But she says the cheaper accommodations, such as Airbnb and rental camper vans, are suffering.

SVERRISDOTTIR: We're getting more valuable tourists who are coming to the country than did before. They're actually staying for a longer amount of time.

UNIDENTIFIED PERSON #1: Just as a warning, it is rough today, so we expect pretty rough finishes. We have pills for seasickness.


UNIDENTIFIED PERSON #1: Well-prepared.

UNIDENTIFIED PERSON #2: Thank you, sir.

UNIDENTIFIED PERSON #1: Welcome on board.

NORTHAM: On a gray, rainy afternoon, some hardy tourists venture out onto one of the many whale watching boats moored at a Reykjavik harbor. Raul Zabala (ph) sells tickets for the tours. He says he's seen a distinct trend since WOW Air.

RAUL ZABALA: People call me less numbers, but they spend more - way more money.

NORTHAM: And that could help soften the blow of WOW Air's demise. Jackie Northam, NPR News, Reykjavik. Transcript provided by NPR, Copyright NPR.

Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.