Just three weeks after Icelandair Group announced it would acquire rival Wow Air, the two Icelandic long-haul low-cost airlines on Thursday confirmed they have abandoned the plan. A merger of the competitors—who said Thursday they both agreed to the outcome—would have led to a much-needed reduction of capacity on routes between Europe and North America over Keflavik Airport and possibly helped buttress the financial footing of both companies.

Icelandair had called a general meeting for Friday, November 30, to ask shareholders to vote on the proposed acquisition and approve a capital increase to pay for the buy.

But in a statement today to the Iceland Stock Exchange, Icelandair Group said that the sides would not settle all the conditions in a November 5 Wow share purchase agreement by Friday and, therefore, the board would not recommend to the shareholders that they agree to the merger. “Furthermore, the board does not intend to submit to the shareholders’ meeting a proposal to postpone decision-making on the purchase agreement,” it added. It did not release details of the conditions, nor did it specify which conditions couldn’t be met.

Icelandair issued two profit warnings this year, prompting the resignation of group president and CEO Björgólfur Jóhannsson in August, and last month it initiated negotiations with bondholders who invested $213.7 million in the company because it could no longer meet the terms of the financing. It has started the sale process of its hotel division to generate cash. The group still reported a net profit of $62 million in the third quarter, down 36 percent on its performance during the same period a year ago; revenue rose 2 percent to $545.2 million.

Wow’s financial situation appears more dramatic. The airline, which emerged just over five years ago and this year scheduled an average of 20.6 daily departures and 4,481 daily seats between Iceland and the U.S., this week said it would cut its fleet by two Airbus A320s and two A330s in cooperation with its lessors as part of a “necessary restructuring of the airline and to ensure maximum utility of its remaining fleet.”

It also said it was “working diligently” to seek additional long-term funding amid a deteriorating outlook and called the funding initiatives a “necessity for the business.” 

Fourth quarter results proved “materially worse than originally anticipated,” the airline noted on November 27. “Lessors, creditors, and authorities have been monitoring the situation even closer and demanded stricter payment terms before further putting pressure on the company's cash flow,” it added.

On the failed sale to Icelandair, Wow CEO and founder Skúli Mogensen lamented the difficulty of the undertaking. “[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,” he said.