Travel

New Icelandic carrier enters low-cost transatlantic market


Passengers board a jet Airbus operated by Icelandic low-cost carrier Play.

Player

Iceland’s fledgling low-cost airline Play has announced new transatlantic service from a third US airport, Stewart International in New Windsor, New York, starting June 9. (Stewart is about 65 miles north of New York.)

Play, which launched last July with non-stop flights from Reykjavik, Iceland, to Stansted Airport in London, is the latest low-cost airline to attempt to run a deeply discounted service across Atlantic.

Play’s immediate Icelandic ancestor, Wow Air, went bankrupt in 2019 after launching long-haul services to the US west coast and India. Danish Primera Air suffered a similar fate in 2018. Norwegian low-cost competitor Norwegian, meanwhile, abandoned long-haul intercontinental operations in January 2021 in order to focus on European and Middle Eastern routes.

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Now Play will launch flights from the US to Reykjavik – and from there to 22 other European cities – on April 20 with flights from Baltimore/Washington International Airport, followed by Boston Logan from May 11 using Airbus A320neo and A321neo narrow body. . The carrier is promoting new connecting services to Europe with fares as low as $109 one-way. CNBC.com Associate Editor Kenneth Kiesnoski spoke with Play CEO Birgir Jonsson — formerly of Wow Air itself — about what it’s like to start an airline in the midst of a pandemic and how Play plans to succeed where others have failed.

(Editor’s Note: This interview has been condensed and edited for clarity.)

Kenneth Kiesnoski: Maintaining low-cost service across the Atlantic has proven tricky as the failures of airlines like Iceland’s Wow Air show. How will Play succeed where others have stumbled?

Birgir Jonsson: Play and Wow are actually intertwined, so to speak. Many members of our key management team are former Wow employees, as are many of our flight crew. I myself was CEO of Wow for a while.

So we know this story very well. And, in fact, Wow was a great company and worked very well with the business model that we are [now] Operating. It wasn’t until Wow started operating jumbo jets like Airbus 330s and flying to the [U.S.] West coast and basically doing long haul [and] inexpensive thing – which is a hill on which many good soldiers have repeatedly fallen.

Birgir Jonsson, CEO of Reykjavik, the Icelandic low-cost airline Play.

Player

KK: Not only Wow, but Primera Air and even Norwegian, which stopped long-haul flights.

B.J.: To the right. Corn [Play was] was founded with, or successfully raised, approximately $90 million and proceeded to execute a business model of creating a hub and spoke system connecting the United States to Europe with a stopover in Iceland [mixed] with point-to-point traffic to and from Iceland. We launched the European side of the network in June and operated it for six months until we launched commercial sales in the United States.

The reason I think Play will perform better than Wow is simply that the company is better funded, [whereas] Wow belonged to only one guy. And, it was way too big, growing too fast, and the foundation was just too weak. We are a listed company. All aspects of governance around this type of business are completely different, more disciplined, more focused. Also, we now know the pitfalls. We’re just going to focus on the proven concept, the market we know exists.

KK: The pandemic has hit travel hard, but probably business travel the hardest, as work and meetings have moved online. Since you are low-cost, are you only aiming for leisure or will you also be courting business flyers?

B.J.: In a purely marketing sense, we are targeting VFR [visiting friends and relatives] and leisure markets. That said, I still struggle to define business travel because when someone says “business travel” most people think of someone traveling business class, who drinks champagne – premium service.

But there are many people who travel for reasons other than holidays or visiting friends. Go to conferences [or] training, for example — that sort of thing. It’s not just high-level CEOs who go to Davos, you know. We just want to offer a no frills product that is very economical and very easy to use. We don’t have business class; it is an all-economical product. But for anyone, whether a business or an individual, who just wants a simple approach, a good ticket price and safe and fast service, we are the right choice.

KK: Would you say Play is ultra-low-cost, like Ryanair, Frontier or Spirit? What makes you different from the Icelandic airline other than the price?

B.J.: In the case of Ryanair, they fly relatively shorter. If I have to fly to New York, it takes five hours. You need to be able to recline your seat and be able to have some leg room and such. So we’re not going to go hardcore like that. If there is a distinction between a low cost product and a very low cost product, I would say that we are a kind of low cost product.

If you compare us to Icelandair, I would say the product is almost identical. Ok, we don’t have business class as such. But in terms of the general onboard experience, on both airlines you have to pay for your meals, drinks and luggage etc. Legacy airlines are turning into low-cost products anyway. If I made a list of 10 things that would warrant this, the top five on that list would be “price”.

KK: How has Covid affected your launch plans? I know about 10 new carriers debuted last year during the pandemic. Did you slow things down and take the opportunity to polish or what?

B.J.: We started operations with the general idea that Covid would end in the next 12-18 months, and that seems to be happening. To start an airline, especially a transatlantic airline, you need a runway. You have to hire crews, you have to train them. You have to position yourself in the market.

We always needed some sort of ramp-up period. So we never focused on financial performance in the first six to eight months, or even the first twelve months. The request was more to build an airline and make everything work and basically be ready for the realization of the whole business model, which will be in the spring when we launch the United States [flights].

Would I have liked Covid to end sooner, or would I have liked more passengers? Sure. But we managed to get an occupancy rate of 53% and 100,000 passengers – in a country of 400,000 inhabitants, in the midst of Covid. We are extremely happy about it. We would have liked to have 80%, of course, yes. But it was acceptable.

Icelandic airlines have long offered transatlantic passengers free stops at the international hub of Keflavik, Iceland, to promote tourism in places like the Landmannalaugar Valley.

Anastasie Shavshyna | E+ | Getty Images

KK: Low-cost carriers often serve secondary urban airports. But you fly to BWI and Boston Logan, so why Stewart for the NYC subway market?

B.J.: New York is one of the most competitive markets in the world. Our position is to win passengers with low fares. And you can offer low rates [only] if you have low cost. Stewart delivers that, for sure. It’s a lean airport to use. You can’t be cheap if you have the same cost base as everyone else; then you subsidize the tickets. And that’s basically what happened in the case of Wow.

The other side is that there is also very little competition in upstate New York; there are no international flights at the moment. [But] there are lots of attractions and businesses, and real estate prices have skyrocketed. It’s an almost completely different market than New York. I am completely in love with Stewart. Baltimore is a similar story, because in Europe we don’t talk about Baltimore. We would say “Washington”. BWI is quite a ways out of town but there is a client in Maryland.

KK: Like Icelandair, Play offers a free stopover in Reykjavik for passengers, which helps local tourism. But before Covid, there was a pushback in many popular destinations about over-tourism. What is your point of view ?

B.J.: [The stopover] is a tradition that has been built over decades and we deliver it, that’s for sure. In terms of Icelandic tourism, this is interesting. It is becoming one of the largest industries in Iceland, apart from fishing. We have so much nature and so much to see. But visitors tend to congregate around the same places, whereas if you drive for 20 minutes you’ll see the same thing, but you’re completely alone.

This is a discussion that is happening in all popular destinations. Locals can’t get tables in restaurants and all that. But the thing is, we couldn’t sustain these high-quality restaurants, clubs and bars in Iceland if there weren’t tourists. In that sense, Covid was a good thing – if you can call a pandemic a good thing. One day, everything stopped. And you don’t really know what you have until you lose it.


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