New Icelandic service makes a play in low-cost transatlantic market

Startup low-fare Icelandic airline Play introduced new transatlantic service out of a 3rd U.S. airport, Stewart Worldwide in New Windsor, New York, to start June 9. (Stewart lies about 65 miles north of New York Metropolis.)

Play, which launched final July with nonstops from Reykjavik, Iceland, to London’s Stansted Airport, is the most recent low-fare airline to aim to make closely discounted service throughout the Atlantic work.

Play’s rapid Icelandic forebear, Wow Air, went bankrupt in 2019 after beginning long-haul providers to the U.S. West Coast and India. Denmark’s Primera Air confronted an identical destiny in 2018. Low-cost Norway-based competitor Norwegian, in the meantime, abandoned long-haul intercontinental operations in January 2021 as a way to concentrate on European and Center Jap routes.

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Now, Play will debut flights from the U.S. to Reykjavik — and onward from there to 22 different European cities — on April 20 with flights from Baltimore/Washington Worldwide Airport, adopted by Boston Logan beginning Might 11 utilizing narrow-body Airbus A320neo and A321neo planes. The service is selling the brand new connecting providers to Europe with fares as little as $109 one-way. CNBC.com affiliate editor Kenneth Kiesnoski spoke with Play CEO Birgir Jonsson — previously with Wow Air himself — on what it is like to start out an airline amid a pandemic and the way Play plans to succeed the place others have failed.

(Editor’s notice: This interview has been condensed and edited for readability.)

Kenneth Kiesnoski: Sustaining a low-fare service throughout the Atlantic has confirmed tough, because the failures of airways like Iceland’s personal Wow Air present. How will Play succeed the place others have stumbled?

Birgir Jonsson: Play and Wow are literally carefully associated, so to talk. Many on our key administration group are ex-Wow workers, as are quite a lot of our flight crew. I actually was Wow’s CEO for a interval.

So we all know that story fairly effectively. And, in truth, Wow was an amazing firm and was doing rather well working the enterprise mannequin that we’re [now] working. It was solely when Wow began working wide-bodied jets like Airbus 330s and flying to the [U.S.] West Coast and mainly doing the long-haul [and] low-cost factor — which is a hill that many good troopers have fallen on many occasions.

KK: Not solely Wow however Primera Air and even Norwegian, which has ceased flying long-haul routes.

BJ: Proper. However [Play was] was based with, or managed to lift, round $90 million and proceeded to execute a enterprise mannequin of making a hub-and-spoke system connecting the U.S. to Europe with a cease in Iceland [mixed] with point-to-point visitors to and from Iceland. We launched the European aspect of the network-in June and ran that for six months till we launched business gross sales to the U.S.

The rationale I feel Play will work out higher than Wow is solely that the corporate’s higher funded, [whereas] Wow was owned by one man. And, it was manner too huge, grew too quick and the muse was simply too weak. We’re a listed firm. All of the governance issues round that type of enterprise are fully totally different, extra disciplined, extra targeted. Additionally we now know the pitfalls. We’re simply going to concentrate on the confirmed idea, the market that we all know that exists.

KK: The pandemic hit journey onerous, however most likely enterprise journey hardest, as work and conferences migrated on-line. Because you’re low-cost, are you concentrating on leisure solely or will you additionally courtroom enterprise flyers?

BJ: In a pure advertising and marketing sense, we’re concentrating on the VFR [visiting friends and relatives] and leisure markets. Having mentioned that, I at all times have a reasonably troublesome time defining what enterprise journey is as a result of when somebody says “enterprise journey,” most individuals consider somebody flying enterprise class, consuming champagne — some premium service.

However there are lots of people touring for causes aside from occurring vacation or visiting pals. Going to conferences [or] coaching, for instance — these sorts of issues. It is not solely high-powered CEOs going to Davos, you realize. We simply need to supply a no-frills, very economical product that is quite simple to make use of. We do not have a enterprise class; it is an all-economy product. However for anybody, be it an organization or particular person, that wishes only a easy method, a very good ticket worth and secure, well timed service, we’re the fitting selection.

KK: Would you say Play is ultra-low-cost, like Ryanair, Frontier or Spirit? How do you differ from flag service Icelandair aside from worth?

BJ: In Ryanair’s case, they fly comparatively shorter legs. If I’ll fly to New York, it takes 5 hours. You want to have the ability to recline your seat and to have the ability to have some leg area and such. So we’re not going hardcore like that. If there is a distinction between a low-cost and an ultra-low-cost product, I might say that we’re some kind of low-cost.

In the event you examine us to Icelandair, I might say the product is almost equivalent. Okay, we do not have a enterprise class as such. However by way of the final expertise onboard, on each airways you must pay on your meals, drinks and baggage and all that stuff. Legacy airways are reworking themselves right into a low-cost merchandise anyway. If I made an inventory of 10 issues that may justify that, the primary 5 on that listing are “worth.”

KK: How did Covid have an effect on your launch plans? I do know round 10 new carriers debuted final 12 months in the course of the pandemic. Did you gradual issues down and use the chance to fine-tune or one thing?

BJ: We began operations with the final view Covid would finish within the subsequent 12 to 18 months, and that appears to be occurring. With a purpose to begin an airline, particularly a transatlantic one, you want runway. It is advisable to rent crew, it’s essential to prepare them. It is advisable to place your self in the marketplace.

We’d at all times have wanted some type of a ramp-up interval. So we have now by no means been targeted on monetary efficiency within the first six to eight— and even 12 — months. The demand was extra to construct an airline, have every part working and mainly be ready for when the entire enterprise mannequin is realized, which can be in spring once we launch the U.S. [flights].

Would I’ve appreciated Covid to finish sooner, or would I’ve appreciated extra passengers? In fact. However we managed to get a 53% load issue and 100,000 passengers — in a rustic of 400,000 folks, in the midst of Covid. We’re extraordinarily joyful about that. We’d have appreciated to have 80%, in fact, sure. However this was acceptable.

KK: Low-cost carriers usually serve secondary city airports. However you are flying into BWI and Boston Logan, so why Stewart for the New York metro market?

BJ: New York is likely one of the best markets on this planet. Our place is to win passengers with low fares. And you may supply low fares [only] when you’ve got low prices. Stewart affords that, for certain. It is a lean airport to make use of. You can’t be low-fare when you’ve got the identical value base as everybody else; you then’re subsidizing tickets. And that is mainly what occurred in Wow’s case.

The opposite aspect is that there is additionally little or no competitors out of upstate New York; there aren’t any worldwide flights for the time being. [But] there are quite a lot of sights and companies, and actual property costs have been rocketing. It is virtually a totally totally different market than New York Metropolis. I am fully in love with Stewart. Baltimore’s an identical story, as a result of in Europe we do not discuss Baltimore. We might say, “Washington.” BWI is a good manner out of the town however there is a buyer there in Maryland.

KK: Like Icelandair, Play affords a free stopover keep in Reykjavik for passengers, which helps native tourism. However pre-Covid, there was pushback in lots of in style locations about over-tourism. What’s your take?

BJ: [The stopover] is a convention that has been constructed over a long time and we, for certain, supply that. When it comes to Icelandic tourism, it is fascinating. It is turning into one of many largest industries in Iceland, aside from fisheries. We’ve got a lot nature and a lot to see. However guests have a tendency to assemble across the identical spots, whereas for those who drove for 20 minutes you’d see the identical factor — however you are fully alone.

It is a dialogue that is occurring in all in style locations. Locals cannot get a desk on the eating places and all that. However the reality is that we could not maintain these high-quality eating places, golf equipment and bars and such in Iceland if it weren’t for vacationers. In that sense, Covid was a very good factor — for those who can name a pandemic a very good factor. Sooner or later, every part simply stopped. And you do not actually know what you may have till you lose it.