As the flag carrier of Iceland, Icelandair has long been a national entity within its country. It has stood the test of time and shows no signs of slowing down. Still, it has been met with homegrown competition over the years. The most recent airline to make a name for itself in the Nordic island is PLAY. Despite the low-cost carrier's (LCC) strong start, Icelandair’s leadership isn’t too concerned about its addition.

Mid-Atlantic triumphs

PLAY kicked off operations in June 2021 and has been growing by the month. The airline has a sizable network on both sides of the pond and flew a total of 800,000 passengers last year. With 19 months now under its belt, the momentum has been continuing for the carrier. The company flew 62,000 passengers in January, a figure that is five times higher than the same period last year.

Connecting Europe and North America with its Airbus A320neo family aircraft, PLAY's business model often draws comparisons with part of Icelandair's strategy, with the latter offering a transatlantic link via Keflavik International with its Boeing narrowbodies. Of course, Icelandair also has the widebody 767 at its disposal on long-haul missions, but it is the 737 MAX and the veteran 757 that provide the backbone of international operations.

A notable difference between PLAY and Icelandair’s approach is price. The former prides itself on offering low fares. In contrast, Icelandair has thrived as a more traditional legacy carrier.

Photo: The Global Guy/Shutterstock

A word from the chief

Icelandair highlights that it could lower costs if it wanted to, but it wouldn’t make economic sense. During a roundtable with journalists that Simple Flying attended in Reykjavík, Iceland, last month, Icelandair president and CEO Bogi Nils Bogason shared:

“I always say it costs money to make money. We have invested in a very strong infrastructure on our end with the distribution, the sales offices in all our markets, the partnerships with other airlines, and the branding.”

Bogason explained this strong infrastructure on the revenue and commercial side makes up for the higher costs during critical times such as the pandemic and the jet fuel crisis. He said:

“We can decide to lower our costs by 20-25% just now by adding seats to the plane and decreasing the pitch. But that does not fit with our business model. We are operating an airline in Iceland where it’s expensive to operate a company.”

In conclusion, when looking at the economies of scale, Bogason feels it does not make sense to operate a low-cost airline out of Iceland. With Icelandair's best Q4 performance in seven years, the robust revenue streams will go a long way in supporting a bright future for the airline.

Photo: Peter Gudella/Shutterstock
 

Balance needed

PLAY isn’t the only low-cost outfit to emerge over the years. We saw the likes of WOW Air come and go. The carrier commenced operations in 2012 and ceased flights just seven years later.

Nonetheless, PLAY has welcomed the mention of the defunct airline when speaking about its own chances. PLAY CEO Birgir Jonnson has plenty of praise for WOW but has affirmed that his carrier will have a long-term future in the industry thanks to a more disciplined approach focusing on its strengths. All in all, he feels that WOW grew too fast.

Thus, with PLAY recognizing the risk of failure with too ambitious expansion, there is plenty of room for both the LCC and Icelandair within Iceland. After all, a little competition is what will drive a healthy industry.

What are your thoughts about Icelandair and PLAY? How do you feel the two Icelandic carriers compare? Let us know what you think of the airlines and their prospects in the comment section.