Investment group Indigo Partners, owner of discount airline Frontier, has stepped in to rescue Wow Air, the faltering Icelandic ultralow-cost carrier.
Wow announced the tentative investment agreement late in the day Thursday, just hours after its proposed purchase by competitor Icelandair fell through amid Wow's worsening financial condition.
Terms of Indigo's investment into Wow have not been disclosed.
"Following successful completion of due diligence, the parties would work to close as soon as practicable," Wow said in a statement. "Wow's CEO and primary shareholder, Skuli Mogensen, would remain a principal investor in Wow upon completion of the transaction."
The parties did not say whether Indigo would take over a majority stake in Wow.
Along with Frontier, Indigo owns Hungarian budget airline Wizz Air and is the lead investor in discount carriers Volaris and JetSmart of Mexico and Chile, respectively.
In a prepared remark, Indigo managing partner Bill Franke called Wow a successful and well-regarded brand.
"We have a strategic vision for the airline and look forward to working with its employees and agents to deliver on that vision," Franke said.
Wow lost $47.6 million during the first half of this year and its financial condition has deteriorated further in recent months. On Tuesday, the carrier said that fourth-quarter results would be "materially worse" than anticipated, fueled by a snowball effect from bad publicity.
The resulting loss of confidence in the company by Wow's creditors and aircraft lessors has led to a demand for stricter payment terms, which has put further pressure on the company's cash flow, Wow said.
On Wednesday Wow announced that it would downsize its fleet by four aircraft, a 20% reduction.
Wow flies to 25 destinations in the U.S. and Europe out of its Reykjavik hub. It flies to 10 U.S. cities, with Orlando service slated to begin on Dec. 18.
Its rapid growth over the last five years has helped fuel a tourist boom in Iceland.