Icelandair Group has announced its intention to buy rival WOW air.
The deal, subject to approval, will see both airlines continue to operate under separate brands.
Their combined market share on the transatlantic market is around 3.8%.
A statement to the financial markets said the acquisition ‘creates opportunity for both companies to become even better prepared to provide international carriers with strong competition in the international airline market’.
Bogi Nils Bogason, interim president & CEO Icelandair Group, said: "WOW air has in recent years built a strong brand and enjoyed great success in the company’s markets to and from Iceland and across the Atlantic.
"There are many opportunities for synergies with the two companies but they will continue to operate under their own brands and operating approvals. The tourism industry is one of the cornerstones of the Icelandic economy and it is important that flights to and from Iceland will remain frequent."
Skuli Mogensen, CEO and founder of WOW air, said: "I am very proud of the success and development that we at WOW air have enjoyed in the past few years and I am thankful for the response we have received since our very first flight.
"We have created a strong team that has reached remarkable success and has been a pioneer in low cost flights across the North-Atlantic. A new chapter now starts where WOW air gets an opportunity to grow and prosper with a strong backer like Icelandair Group that will strengthen the foundations of the company and strengthen its international competitiveness even further."
Icelandair Group is to hold a shareholders’ meeting where shareholders will cast their vote on the acquisition.
