In 2021, we saw the launch of PLAY Airlines, an ultra low cost carrier in Iceland that intended to use Reykjavik (KEF) to connect points in North America with points in Europe, just as Iceladnair does.
PLAY’s business model is nothing new. Icelandic low cost carrier WOW Air ceased operations in 2019, and had a nearly identical business model. Heck, many of PLAY’s executives were former WOW Air executives. However, they believed things would be different this time around.
Unfortunately that’s not how the situation is playing out, as the airline has announced plans to fundamentally change its business model.
In this post:
PLAY deemphasizes North America to Europe traffic
PLAY Airlines is changing its business model, by increasing the emphasis on strong leisure markets out of Iceland, and deemphasizing its business of connecting passengers between North America and Europe.
The point-to-point part of PLAY’s network, primarily flights between Iceland and Southern Europe, has been profitable from the beginning. However, the carrier’s yields on its hub-and-spoke business across the Atlantic has had disappointing financial performance from the beginning, and particularly in 2024.
The airline claims that the North America market has changed substantially recently, with capacity increases having a negative impact on the carrier’s results. As a result, the airline plans to significantly cut back its North Atlantic routes. By mid-year 2025, the airline will decrease destinations in North America and Northern Europe.
The challenge is, while the point-to-point part of PLAY’s network has been profitable, it’s also much smaller than the hub-and-spoke business, given Iceland’s small population. As a result, the airline needs to find new uses for some of its aircraft.
PLAY has applied for an Air Operator Certificate (AOC) in Malta, with plans to base some of its aircraft outside of Iceland. PLAY’s first project of this nature is this winter with US carrier GlobalX in Miami, as PLAY will be leasing out its jets for charter services. The plan is to operate six to seven aircraft with the Icelandic AOC, and three to four aircraft with the Maltese AOC.
Here’s how PLAY CEO Einar Örn Ólafsson describes this shift:
“Since PLAY’s inception, we’ve observed shifts in the market, and it is our view that the via-route network is no longer as profitable as it once was. As a result, we have decided to adjust our business model, which will take effect around mid-2025. PLAY remains the airline of choice for Icelanders, and we aim to increase our share in the local market. In short, we will focus on the aspects of our business that have proven both successful and profitable—namely, transporting passengers between Southern Europe and Iceland. PLAY currently operates a fleet of 10 aircraft, but with these changes, about six to seven will remain under the Icelandic AOC, while three to four will be allocated to other projects. One aircraft will be temporarily leased to Miami, and we are exploring a year-round project that we hope to announce soon. I am confident that these adjustments to our business model will allow us to grow, ensuring PLAY remains a top choice for travellers.”
The airline industry’s optimism is quite something
I love the airline industry. I also think it’s a really bad business, even under the best of circumstances. So I appreciate that there are entrepreneurs out there who want to start airlines, but I also don’t really get it.
WOW Air liquidated in 2019, and then almost immediately, some former executives wanted to start a new airline with a very similar business model, while perhaps learning from some of the mistakes of WOW Air, and having better lease terms on aircraft.
But still, the fundamental problem with the business model was the same — demand across the Atlantic is highly seasonal, and going after the lowest yield traffic is challenging, since legacy carriers can afford to sell cheap economy fares to supplement their premium fares.
WOW Air isn’t alone, even across the Atlantic. In 2021, Norwegian discontinued long haul flights and retired its Boeing 787 fleet, as the airline was losing so much money on them. In 2022, we saw the launch of Norse Atlantic Airways, run largely by many former Norwegian executives, with a nearly identical business model, even using former Norwegian Boeing 787s.
Several weeks ago, Norse also announced that its business model wasn’t working and that changes were needed, including getting rid of some aircraft, leasing out other aircraft, and reducing reliance on the Atlantic.
“Insanity is doing the same thing over and over again and expecting different results” — that old quote seems pretty relevant here, no?
Bottom line
PLAY Airlines is shifting its business model. The airline will focus less on using Iceland to connect traffic between North America and Europe, and more on point-to-point leisure routes out of Iceland, along with leasing out aircraft.
I can’t say that I’m surprised by PLAY’s struggles, given that WOW Air had a similar business model and failed. For that matter, Norse Atlantic also recently announced it was changing its business model, which was based on Norwegian’s long haul operation.
What do you make of PLAY shifting its business model?
IMHO the major problem with PLAY's strategy was that Iceland Air uses essentially the same approach as a connecting hub and has both better service and offers more options in the way of layovers plus connecting more city pairs. Iceland Air seems to be doing well and is expanding so it isn't necessarily the model that is broken but the fact there is a well established incumbent and there simply isn't enough business for 2...
IMHO the major problem with PLAY's strategy was that Iceland Air uses essentially the same approach as a connecting hub and has both better service and offers more options in the way of layovers plus connecting more city pairs. Iceland Air seems to be doing well and is expanding so it isn't necessarily the model that is broken but the fact there is a well established incumbent and there simply isn't enough business for 2 airlines. I expect this news is a positive for Iceland Air and, sadly, I can likely not get the $1000 round trip Saga Premium fares from the US to Europe (with a free layover in Iceland going both ways) that I've used in the past.
A very limited amount of people in the catchment area is indeed a bit of an issue. It means limited growth possibilities. Strange how it takes several attempts with startup airlines to find this out...
As long as one is not in a hurry and can plan in an Iceland stopover at no added costs, there's really little incentive these days to fly across the pond via Iceland, as choice is plenty and fares...
A very limited amount of people in the catchment area is indeed a bit of an issue. It means limited growth possibilities. Strange how it takes several attempts with startup airlines to find this out...
As long as one is not in a hurry and can plan in an Iceland stopover at no added costs, there's really little incentive these days to fly across the pond via Iceland, as choice is plenty and fares are low. It just adds an extra stop and with the Icelandic weather and volcanic activity, that means an avoidable extra risk factor. However, Iceland (and even Reykjavik) is an amazing place to spend some time, so that's really recommended if one has the opportunity. But I think the Iceland stopover market really is becoming more and more of a niche market, especially now that also narrowbodies can do TATL without an issue: that's a bigger game changer than most seem to realize.
On a related note: Norse has now returned its 787-8s, and gone in the wet lease and charter business and is apparently leasing one or two aircraft to Neos for flights to and from Italy. However, given how the share value plummeted to penny stock, the cash flies out of the window and the new half-baked strategy takes ages to implement, it seems that most investors are expecting a round of share emissions soon. Either that, or selling off the airline to some company that looks into expanding its long haul fleet in a quick way. We'll see.
Ted. Song. WOW. Swoop. Zip. Joon. Play.
The unstated rule is: give your LCC airline a hilariously stupid name and it will 100% fail by the time you get home this afternoon..
That's the Spirit! ;)
If i recall correctly - the founders of WOW air seemed to blame bringing in A330's for the collapse of the company way back when. I think they (naively) were claiming that if they had just stuck to the 320 series, the company would not have run into issues.
"I am confident that these adjustments to our business model will allow us to grow." oh the irony. They're confident that offloading half their fleet will GROW the airline?
“Insanity is doing the same thing over and over again and expecting different results”
It's not the same thing because this time it's someone else that gets to get rich off this idea
I think the other problem with these carriers is they think they can treat customers terribly right off the bat like they're Ryanair, not realising you need to at least wait until you have foothold to do that. People try them, have an appalling experience, and never fly them with again, ensuring they tell everyone they know to not to either. Also the savings are pithy once you add things you generally need flying long-haul,...
I think the other problem with these carriers is they think they can treat customers terribly right off the bat like they're Ryanair, not realising you need to at least wait until you have foothold to do that. People try them, have an appalling experience, and never fly them with again, ensuring they tell everyone they know to not to either. Also the savings are pithy once you add things you generally need flying long-haul, and uncompetitive compared to legacy carriers who with deals are often not much more or cheaper bundled.
Why does it keep happening? Less than intelligent people that think an airline can sell fares for less than it's operating costs and make money. Airlines that do not have lucrative premium travel of cobranded streams of revenue, particularly credit cards.
Altering your business plan to adjust for how the market is going is a necessary and positive thing to do. However, you also have to think about the moves you make before you make them. In this case, Iceland is a good stopover spot if your traveling trans Atlantic. OTOH, it's a horrible O&D market, as it is so small. I don't see these guys making a living out of point to point from KEF...
Altering your business plan to adjust for how the market is going is a necessary and positive thing to do. However, you also have to think about the moves you make before you make them. In this case, Iceland is a good stopover spot if your traveling trans Atlantic. OTOH, it's a horrible O&D market, as it is so small. I don't see these guys making a living out of point to point from KEF to/from Southern Europe. The market is too small and Icelandair is in it already. Try again, Play.
That’s actually not the definition of insanity at all. Doing the same thing multiple times very often yields different results. As anyone who has rolled a pair of dice can tell you
Only in a world with perfect odds. If the die (economics) are loaded, you’ll often get the same result over and over.
Although I agree probabilistic outcomes can always allow for a different result, I think the die have been rolled enough in this arena to know they are pretty loaded
99.9999% of dice in the world are non-loaded dice so that's a really weird point to stake out
Oh I just saw your further comment and see you're making a more general point. Sorry
Both Norse and Play are dead men walking.
It’s usually a sign that the end is near, when these kind of Airlines moves away from their core business model.
By starting obscure routes, sometimes disconnected from their main hub or beginning to wet lease their aircraft out instead of their own flying
True, see also - for example - Air Belgium:
Yay, scheduled services to China and Hong Kong. Oh noes, now for some flights to the Caribbean. Oh no, let's try wet leases. Oh no, almost bankrupt!
Now Baltia on the other hand has been around for decades already :-)
And Breeze. They haven't changed their business model per se, but rather incorporated rapid shifts into the model itself. They change where they fly so fast, you get whiplash trying to keep up. Hard to believe that will work out for them.