UPDATE: WOW Air: Struggling budget airline gets a lifeline from parent of Frontier Airlines

ORIGINAL POST: Icelandair’s planned acquisition of struggling rival WOW Air is off.

"The planned acquisition of Icelandair Group of Wow air will not go through,” interim Icelandair CEO Bogi Nils Bogason said in a Thursday statement.

“The Board of Directors and management of both companies have worked on this project in earnest,” Bogason added. “This conclusion is certainly disappointing. We want to thank WOW air‘s management for a good cooperation in the project during recent weeks . All our best wishes go out to the owners and staff of the Wow air.”

Skúli Mogensen, WOW Air CEO and founder, also addressed the end of the deal in Icelandair’s statement.

TODAY IN THE SKY:WOW Air shrinks fleet by 20%, could cut service to U.S. cities

"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,” Mogensen said. “We thank the Icelandair Group's management team for this challenging project, and also wish the management and staff of Icelandair Group all the best."

Earlier this month, Icelandair and WOW had announced a deal in which Icelandair would acquire the upstart budget carrier. Under that plan, the airlines would have operated as separate brands under the same company.

The collapse of the deal will likely raise uncertainty about what's next for WOW, which has faced recent questions about its liquidity.

On Wednesday, WOW said it was returning four of its planes to their lessors. The news comes amid a reported cash crunch at the carrier that's become big local news in Iceland.

WOW confirmed to USA TODAY’s Today in the Sky blog that it is sending two Airbus A320 narrowbody jets and two Airbus A330 widebody jets back to their owners.

“This is a part of necessary restructuring of the airline and to ensure maximum utility of its remaining fleet,” Anna Romano, a U.S.-based spokeswoman for the carrier, said in an email to Today in the Sky.

Already, speculation has surfaced on aviation-themed websites about possible cuts to WOW's U.S. schedule.

When asked if any changes are coming, WOW representative Romano told Today in the Sky that the carrier’s "winter schedule is currently under re-evaluation due to changes in WOW Air’s fleet, but nothing has been finalized.”

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