Iceland’s Wow Air has begun a restructuring exercise that saw it lay off 111 employees on Thursday and lay out plans to reduce its fleet size from 20 to 11 aircraft. The plan calls for Wow to shed all its Airbus A330s and sell four A321s in a transaction it estimates will improve its liquidity position by more than $10 million. The ailing low-fare carrier continues to negotiate a rescue deal with U.S.-based Indigo Partners.

The airline said it would implement a new flight schedule in January. The changes will not affect schedules for December or early January.

“This is the most difficult day in the history of Wow Air,” said airline founder and CEO Skuli Mogensen. “We have dedicated people who have worked hard to make Wow Air a reality, and it breaks my heart to downsize the company. However, in order to ensure our future and preserve Wow Air in the long run, we unfortunately must take these drastic measures."

Following the layoffs, roughly 1,000 full-time employees remain with the airline.

On December 5 Wow said it had begun holding due diligence meetings with Indigo Partners in Reykjavik after the sides signed a term sheet a week earlier. Wow characterized the process as progressing, but that subjects of discussion remained, including Wow’s planned network development, vendor contracts including aircraft leases and certain waivers from Wow’s bondholders.  

Word of Indigo’s involvement in late November came just hours after Icelandair Group called off the proposed acquisition of Wow and a day after the financially strapped carrier characterized new long-term funding as a “necessity for the business.”