Icelandic Airline Play’s U.S. Launch Not Dimmed by Inflation, Oil Prices
Icelandic startup Play’s CEO Birgir Jónsson is unconcerned about the potential fallout from the war in Ukraine or Covid on the realization of the airline’s transatlantic ambitions. All three of its initial U.S. destinations — Baltimore-Washington, Boston, and New York Stewart — are meeting expectations, and inflation is not expected to deter American travelers from their long-awaited European holidays.
“If you’re going on holiday, you’re not going to abort your summer vacation if you have to pay $30 more for the airfare, especially if you’re going transatlantic,” Jónsson said in an interview. “In actual fact, the way consumers behave, it’s the price of a beer.”
The beer in his analogy is equivalent to added fuel expenses that Play estimates it needs to recoup since oil prices spiked after Russia’s invasion of Ukraine in February. And even then, Jónsson said, the airline’s estimates were made in March when Brent crude prices were over $120 per barrel. Brent now hovers just over $100 per barrel.
Play is one of a new crop of long-haul, low-cost startups with their eyes on the transatlantic. Norse Atlantic Airways plans to begin flights between its Oslo base and three U.S. destinations by the end of June with former Norwegian Air Boeing 787s. Both Play and Norse follow in the footsteps of failed predecessors. Play embraces its likeness with defunct Wow Air, while Norse distances itself from Norwegian Air’s former long-haul operation, which it increasingly mimics.
The startups enter a competitive marketplace where network carriers are piling on flights for the summer. Industry capacity between Europe and North America is scheduled to be down just 10 percent in the third quarter compared with 2019, according to Cirium schedule data. The decline is significantly less than the 38 percent to Asia and 22 percent to South America, but slightly more than the 8 percent to Africa.
But the odds are long for Play. No long-haul, low-cost carrier has ever succeeded flying the transatlantic. Norwegian Air and Wow Air both failed, as did their predecessors dating all the way back to Laker Airways Skytrain in the late 1970s and early 1980s.
Play’s first transatlantic flight lands in Baltimore on April 20. Operated with an Airbus A321neo, the launch marks the official beginning of the carrier’s Reykjavik hub and the realization of its business model as a hub-and-spoke carrier ferrying budget-conscious travelers across the North Atlantic with a stopover in Iceland. Play has only flown to Europe since it took off last June.
“In May or June we will fly as many passengers in one month like we did the whole of last year. We are seeing a healthy growth in utilization and load factor,” Jónsson said. The airline reported a 66.9 percent load factor in March, its best since launch but still lagging the 72 percent target it set for 2021. The same month, the airline forecast its first-ever operating profit in the second half of 2022, an outlook that Jónsson maintains.
For its U.S. launch, Play sees roughly 70 percent of bookings coming from American travelers. This balance is unusual for European carriers that tend to see higher points-of-sale in Europe than the U.S. Jónsson said the majority of these bookings are for travel onto Europe rather than to visit Iceland.
After Baltimore, Boston flights begin May 11, and Stewart flights on June 9. The latter is something of an out-of-the-box move given the airport’s nearly 70 mile distance — or a nearly hour-and-a-half drive — from Midtown Manhattan. Jónsson said the airline got “a lot of raised eyebrows” for Stewart. Given Stewart’s large catchment of suburban New Yorkers and Play’s connections into Europe, he was confident in the market. This is in contrast to the failed point-to-point flights that Norwegian Air tried at Stewart from 2017-19.
Play already is looking at growth beyond the upcoming summer season. The airline has announced three cold weather destinations — Geneva, Liverpool, and Orlando — for travelers looking for escape during the winter months when east-west transatlantic demand is historically at its lowest.
As for Orlando, which is Florida’s busiest airport and a leisure destination in its own right, a new rail link to South Florida that is due to open by the end of the year or in early 2023 influenced Play’s air service decision. The airline is one of the first to publicly acknowledge the role that Brightline played. Brightline is the first intercity rail link in the U.S. that actually stops in an airport terminal.
“The big thing is by landing at [Orlando] you have the best connection to many points of interest in Florida through this train line,” said Jónsson, who added that Play considered multiple Florida destinations before selecting Orlando. Brightline will initially connect the airport to West Palm Beach, Fort Lauderdale, and Miami, but is planning an extension to Disney World and Tampa in the coming years.
Asked whether Play could offer single-ticket connections with Brightline, Jónsson said the airline would consider it if the opportunity arose.Subscribe Now to Airline Weekly