Icelandic start-up airline Play believes it can weather the Covid storm and that its route from Dublin to Reykjavik, connecting to Boston and Washington DC, will attract price-sensitive leisure travellers, says CEO Birgir Jonsson.
The carrier yesterday confirmed the launch of connecting flights to Washington DC and Boston from Dublin via Reykjavik.
The services will begin next April and May respectively, with the carrier trying to lure passengers with cut-price, one-way fares from €139. Normally, they’ll start at €169 each way, but most travellers will struggle to snap up a limited number of tickets at those rock-bottom prices.
With Dublin already offering plenty of direct flights to North America, and summer 2022 promising the return of many routes that had been suspended during the pandemic, how much will families need to be saving to consider an indirect flight to the US that includes a two-and-a-half hour pit-stop at Reykjavik’s Keflavik Airport?
Would €200 do it? Maybe even €100?
“If you are travelling with a five or six-member family, maybe it makes sense to sit for two hours in Keflavik Airport,” Mr Jonsson told the Irish Independent from Reykjavik.
He thinks that if a family like that is saving €50 a ticket, maybe even each way, the proposition is a strong one.
“The incentive has to be the price,” he added.
“If you don’t lose sight of that, then I think you are OK.
“We have to make sure that the costs of the company are so low that we can offer the lowest prices,” said Mr Jonsson. Investors have already bought into the message.
A range of private equity and Icelandic investment funds ploughed money into the airline during the summer as part of a stock market flotation – just as the carrier flew its first flight.
It raised $35m (€30m) from that move and it was eight times oversubscribed. It had earlier raised nearly $48m in a private placement.
But what has possessed backers to stuff money into a start-up airline with no proven track record? And especially just two years after the collapse of Wow – another Icelandic low-cost carrier.
“They believe in the model,” says Mr Jonsson. “The discipline of running a listed company – there’s a lot of reporting and a lot of transparency. It’s not just me that can be bull*****ing someone.
"They want to see the real situation and not to be hoodwinked by some salesman.”
Mr Jonsson was the deputy CEO of Wow in its early years but wasn’t there when it failed.
He insists that Wow stepped beyond its true low-cost model, flying too far and adding wide-body jets such as the Airbus A330 to its fleet, which are more expensive to operate.
Play currently has three Airbus A320 jets and will have six jets next year, with the fleet rising to 15 in 2025.
It has already signed leases on nine aircraft.
Wow had carried 3.5 million passengers in 2018.
Its collapse, in a country of 400,000, where tourism plays such an important part in the Iceland’s economy, even dented the island’s GDP.
There was the 2008 financial crisis that crippled Iceland, and then there was the collapse of Wow, says the chief executive of the way Icelanders recall their recent economic past. Mr Jonsson says that while Wow offered low fares, its cost base was too high.
“We are absolutely laser-focused on keeping our costs low,” he says. “I was at Wow when it launched its Boston and Washington routes,” he recalls.
“For the next one-and-a-half, two years, Wow was actually making money. It was a really solid company because it was only focused on the US east coast and Canada. Only when it began using wide-bodies and breaking the low-cost model and flying to the US west coast, India, Israel and those places, it basically began losing control of the cost base,” according to Mr Jonsson.
“We’re taking a lesson from Wow and doing what actually worked,” he adds. “We are a listed company, so there’s no one guy controlling the company [Icelandic entrepreneur Skuli Mogensen was founder and CEO of Wow]. It’s a lot more disciplined.”
Mr Jonsson insists that a fleet size of about 15 aircraft is where Play will remain. The business plan sees it being profitable by 2023 and with revenues of around $500m a year once its fleet peaks in 2025.
It lost $9m in the first nine months of this year as it gets off the ground.
“That’s the optimal size in a market that is seasonal, that is fluctuating,” he says of its eventual fleet size. We want to be small and flexible and find our little watering holes around the big animals in the jungle.”