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 Icelandair 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.
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?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.