Business

New Icelandic carrier bets on low-cost transatlantic market

Passengers board an Airbus passenger plane operated by Icelandic cheap ticket carrier Play.

Play

Icelandic low-fare airline startup Play has announced a new transatlantic flight from the third U.S. airport, Stewart International in New Windsor, New York, starting June 9. (Stewart is about 65 miles north of New York.)

Play, launched in July last year with nonstop flights from Reykjavik, Iceland to London Stansted Airport, is the latest low-cost airline trying to get heavily discounted cross-Atlantic services to work.

Play’s immediate Icelandic predecessor, Wow Air, went bankrupt in 2019 after launching long-haul flights to the US West Coast and India. The same fate befell the Danish Primera Air in 2018. Meanwhile, the low-cost carrier from Norway withdrew from long-haul intercontinental flights in January 2021 to focus on European and Middle Eastern routes.

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Play will now begin flying from the US to Reykjavik – and from there to 22 other European cities – on April 20 with flights from Baltimore/Washington International Airport and then from May 11 to Boston Logan on Airbus A320neo and A321neo narrow-body aircraft. . The carrier is promoting new connecting services to Europe at rates as low as $109 one way. CNBC.com Deputy Editor-in-Chief Kenneth Kesnoski spoke with Play CEO Birgir Jonsson – formerly of Wow Air – about what it’s like to open an airline amid the pandemic and how Play plans to succeed where others have failed.

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

Kenneth Kesnosky: Keeping fares low across the Atlantic has proven challenging as the failures of airlines like Iceland’s own Wow Air show. How will Play succeed where others have stumbled?

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

So we know this story well. And actually, Wow was a great company and they were really good at running the business model that we’re using. [now] operating room. It wasn’t until Wow began operating wide body aircraft such as the Airbus 330 and flying in [U.S.] West coast and mostly do long haul [and] a cheap thing is a slide that good soldiers have fallen on many times.

Birgir Jonsson, CEO of Reykjavik, Iceland-based low-cost airline Play.

Play

CC: Not only Wow, but also Primera Air, and even Norwegian, which stopped flying on long haul routes.

Blow job: Right. But [Play was] was founded or managed to raise about $90 million and embarked on a business model to create a hub system connecting the US to Europe with a stop in Iceland. [mixed] with point-to-point traffic to and from Iceland. We launched the European part of the network in June and worked for six months until we began commercial sales in the US.

The reason I think Play will perform better than Wow is simply because the company is better funded. [whereas] Wow belonged to one guy. And it was too big, growing too fast, and the foundation was too weak. We are a registered company. All managerial things around such an enterprise are completely different, more disciplined, more focused. We also now know the pitfalls. We’ll just focus on a proven concept, in a market that we know exists.

CC: The pandemic has hit travel hard, but probably business travel the most as work and meetings have moved online. Since you have a low cost, do you only focus on leisure or will you also be interested in business flyers?

Blow job: In a purely marketing sense, we focus on VFR. [visiting friends and relatives] and entertainment markets. Having said that, it’s always been quite difficult for me to define what business travel is, because when someone says “business travel”, most people think of someone flying business class, drinking champagne – some kind of premium service.

But there are many people who travel for reasons other than vacation or visiting friends. Conference attendance [or] training, for example — such things. You know, not only high-ranking leaders go to Davos. We just want to offer a no frills, very economical product that is very easy to use. We don’t have business class; it is an economical product. But for everyone, be it a company or an individual who needs a simple approach, a good ticket price and a safe and timely service, we are the right choice.

KK: Can you say Play is ultra-low cost like Ryanair, Frontier or Spirit? How are you different from flag carrier Icelandair other than price?

Blow job: In the case of Ryanair, they fly relatively shorter. If I’m going to fly to New York, it will take five hours. You should be able to recline the seat and have legroom and such. So we’re not going to be so hardcore. If there is a difference between an inexpensive product and an ultra-cheap product, I would say that we are of the inexpensive type.

If you compare us to Icelandair, I would say that the product is almost identical. Okay, we don’t have business class per se. But in terms of the overall experience on board, on both airlines you have to pay for food, drinks, luggage and all. Outdated airlines in any case turn into budget products. If I were to make a list of 10 things that justify this, the first five on that list would be “price”.

QC: How has Covid affected your launch plans? I know about 10 new carriers debuted last year during the pandemic. Have you slowed down and used the opportunity for fine-tuning or something like that?

Blow job: We started with the general consensus that Covid will end in the next 12-18 months, and it appears to be happening. To run an airline, especially a transatlantic one, you need a runway. You need to hire a team, you need to train them. You need to position yourself in the market.

We always needed some kind of acceleration period. Therefore, we never focused on financial performance in the first six to eight or even 12 months. It took more to build an airline to get things going and basically be ready for when the whole business model is done, which will be in the spring when we launch the US. [flights].

Would I like Covid to end sooner, or more passengers? Certainly. But we managed to get a load factor of 53% and 100,000 passengers – in a country of 400,000 people, in the midst of Covid. We are very happy about this. I would like 80%, of course, yes. But it was acceptable.

Icelandic Airlines has long offered free stops to transatlantic passengers at its international hub in Keflavik, Iceland, to boost tourism in places like the Landmannalaugar Valley.

Anastasia Shavshina | E+ | Getty Images

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

Blow job: New York is one of the most competitive markets in the world. Our position is to win over passengers with low fares. And you can offer low rates [only] if you have low costs. Stuart suggests it, of course. It is a lean airport in use. You can’t have a low fare if you have the same base cost as everyone else; then you subsidize the tickets. This is exactly what happened in the case of Wow.

On the other hand, there are also very few competitors outside of upstate New York; There are currently no international flights. [But] there are many attractions and businesses, and real estate prices are skyrocketing. It’s almost a completely different market than the New York market. I am completely in love with Stuart. It’s a similar story with Baltimore, because in Europe they don’t talk about Baltimore. We’d say Washington. BWI is out of town but has a client in Maryland.

KK: Like Icelandair, Play offers passengers a free stopover in Reykjavik, which helps boost local tourism. But before Covid, there was resistance to overtourism in many popular destinations. What do you think?

Blow job: [The stopover] it is a tradition that has been built up over decades and we certainly offer it. In terms of Icelandic tourism, this is interesting. Apart from fishing, this is becoming one of the largest industries in Iceland. We have so much nature and so much to see. But visitors tend to congregate around the same places, whereas if you drove for 20 minutes, you would see the same thing – but you were all alone.

It’s a discussion that’s going on in all the popular ways. Locals can’t get a table in restaurants and all that. But the thing is, we wouldn’t be able to run these high quality restaurants, clubs, bars and the like in Iceland if it wasn’t for the tourists. In that sense, Covid was a good thing — if you can call a pandemic a good thing. One day everything just stopped. And you don’t know what you have until you lose it.


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