Ask Icelandic startup Fly Play CEO Birgir Jónsson about comparisons between his carrier and defunct Wow Air and he’ll tell you he welcomes them. Wow, which shut down in March 2019, is remembered by many as the epitome of the overambitious budget carrier whose over-expansion led to its demise.
“I am not ashamed or offended if someone compares us to Wow. I think, in many ways, that’s a great compliment,” Jónsson told Airline Weekly. And the comparisons come in spades: Play was founded by a number of former Wow executives, including Jónsson himself, who was deputy CEO of Wow before its closure. Its business plan outlines the same volume business connecting budget-conscious travelers on both sides of the Atlantic Ocean over a Reykjavík hub. And its fleet consists of the same Airbus A320neo-family jets.
But that’s where Jónsson thinks Play is different. The carrier, which began flights in June, is taking the disciplined approach to the market that Wow did not. It plans to stick to A320neo and A321neo jets — none of Wow’s Airbus A330s — and focus on a flexible operation connecting major Eastern U.S. cities to Europe via Iceland, with the added benefit to Icelandic tourism to boot. And Play only targets a fleet of 15 aircraft by the end of 2025 — Wow’s peaked at 23 aircraft — with three A321neos already in its fleet and another six A320neo and A321neos under contract from lessors.
“To see the opportunity in the market and then try to find the aircraft and fulfill it, that’s the logical” way of doing business, said Jónsson. “[But] it’s so tempting to go get airplanes and then try to find opportunities, and that’s a fatal mistake in any business. You cannot just find the best deal on a great cooking machine and decide to found a restaurant.”
Play is one several startup airlines to launch during the Covid-19 crisis. Since December, Avelo Airlines and Breeze Airways have taken to the skies in the U.S., Flyr in Norway, Itapemirim Transportes Aéreos (ITA) in Brazil, and Lift Airlines in South Africa. And at least two more are in the works, Connect Airways in the U.S. and Norse Atlantic Airways in Norway.
Crises historically are a good times to launch an airline. Downturns often leave incumbents struggling and unable to mount a strong defense against new competitors. In addition, the barriers to entry are lowered with cheap aircraft available — Play has acquired its fleet at lease rates up to nearly a quarter lower than before the crisis — laid-off staff looking for work, and airports eager to fill the gaps left by retrenching legacy carriers. One only has to look as far as JetBlue Airways and Wizz Air after 9/11, and Azul after the Great Recession to find examples of startups that succeeded in the recoveries of economic crises.
But just because crises create opportunity does not make starting an airline easy. Play only filled 41.7 percent of its seats in July and 46.4 percent in August, its first two full months of operations. These loads are far short of the target 72 percent first-year load factor that Play outlined in a presentation to would-be investors in June.
“We deem this year, up until next spring, as like a ‘warm-up’ phase,” Jónsson said when asked about Play’s first early performance. The airline is focused on a reliable operation and expanding sales on the major global distribution systems, as well as boosting loads on its initial group of routes during this phase. July and August took a hit from the latest wave of Covid-19, something that was not included in its June investor outlook, and Play is unlikely to fill 72 percent of seats this year, he said. On a positive note, many bookings were just postponed — not cancelled — giving him optimism for the fall outlook.
“We’re just on track to building ourselves up to the main event, which is the U.S. operation,” said Jónsson. Play aims to begin flights to the East Coast next spring with tickets going on sale by the end of the year pending receipt of a U.S. foreign air carrier certificate, which it applied for in August.
Asked where Play intends to fly in the U.S., Jónsson first declined to name destinations citing competitive concerns. He then went on to say that “it’s always going to be a mixture of Baltimore, Washington, Boston, New York and Toronto.”
Jónsson added that the airline’s startup phase will likely last into 2023, well after U.S. flights are due to begin, at which point he sees its operation realizing the business plan laid out to investors in June.
In terms of competition, Play does not see itself as a major disruptor for the likes of British Airways or United Airlines. Jónsson envisions the airline as something of a nimble, but niche, player filling a gap in the market for a budget carrier connecting North America and Europe via Iceland. “We do not want to be big. We do not want to be a volume player,” he said.
And he’s correct in the fact that an airline with just 15 aircraft, all narrowbodies, flying sub-daily frequencies is unlikely to have a significant impact on the major transatlantic players. Icelandair, whose model Jónsson cited as an example for Play, will feel the most pressure. A spokesperson for Icelandair was not immediately available for comment on the new competition, and the carrier did not acknowledge the startup in its second quarter results statement.
“We have to be optimistic,” Jónsson said of Play’s outlook. And with nearly $82 million in unrestricted cash on hand, the airline has some runway ahead of it to weather the unpredictable recovery.
