Iceland Transit Passengers Down 43% Following WOW Collapse

Since WOW Air closed its doors, the impact on the Icelandic economy has been painfully clear to see. The most recent statistics on tourist numbers show transit passengers are down by a staggering 43%. But is this entirely due to the lack of WOW, or is there something else going on?

WOW air at KEF
Transit passengers are down 43% since WOW shut up shop. Photo: Wikimedia

The WOW story

WOW Air had an excellent business model. Thanks to the handy location of Iceland between Europe and North America, the airline could break into the lucrative transatlantic market. But rather than taking passengers straight from where they were to where they wanted to go, travelers on WOW could add on a bit of sightseeing in Iceland as part of their trip.

WOW air route map
WOW Air offered an enticing stopover and easy connection to a wide range of European destinations. Image: WOW Air

This could range from a few hours in the Blue Lagoon between flights, to a full-on five day tour of all the best geysers and glaciers. Passengers loved this added layer of adventure, as well as the ability to connect from multiple locations in North America to a great variety of European cities, not just major hubs but secondary airports too.

Of course, WOW wasn’t the only airline doing this. Fellow Icelandic carrier, Icelandair, could also offer the stopover and flexibility of destinations that WOW did, with one big difference; WOW could do it for much, much less.

Icelandair still offers the stopover option but at a higher price. Photo: Ozzy Delaney via Flickr

Because they weren’t doing the whole journey in one go, they could afford to do it cheaper, on narrowbody aircraft which, at the time, wouldn’t have had the range or passenger comforts necessary for a direct trip. They cut out the frills, charged for extras and ground down their fares to the bare minimum.

Unfortunately, this was to be the downfall of WOW. As fuel prices soared in 2018, the airline struggled to maintain its bottom line. They daren’t raise their prices, particularly as North American airlines had started introducing basic economy, which was competitive with the WOW fare but with more facilities. Ultimately, WOW just couldn’t make it work, and closed its doors for the last time back in March this year.

Passengers declining

Since the demise of WOW, the heyday of Icelandic tourism seems to be well and truly over. Statistics Iceland highlighted the decline in tourism in a recent publication. Overall, the number of tourists visiting Iceland in May 2019 was down 20%, compared to the same period last year. Most notably, the number of transit passengers passing through Iceland was down a massive 43% in the most recent quarter.

KEF airport
Passenger movements at KEF are down across the board. Photo: Isavia

As well as this, there were numerous other indicators of the impact of the loss of WOW:

  • Passenger transport by air: Down 16%
  • Passengers through Keflavik Airport: Down 15% overall, with foreign visitors down 17%
  • Total passenger movements through the airport: Down 28%
  • Total turnover from tourism: Down 12%

These statistics compare the most recent quarter (April – June) with the corresponding period last year. As WOW shut up shop in March, it’s the first entire quarter that Iceland has been without its ultra low cost carrier, and the effects are clear to see. However, is this all down to the demise of WOW?

Aside from the WOW factor

Before WOW even stopped operating, there were indicators that things were slowing down for the Icelandic airline. In January, Turisti reported that WOW’s load factor was down from 88% in January 2018 to 80% in January 2019. But this problem wasn’t theirs alone. Isavia, the operator of Keflavik Airport, reported that passenger traffic overall had dipped during the winter months, and Icelandair’s load factor had dropped to 72%.

Back in 2015, Skift reports that one-third of Iceland’s income came from tourism. At the height of the tourism boom, visitors to Iceland were increasing by as much as 39% each year. By 2017, that had slowed to an increase of 24%, and by 2018, the increase was just 5.5%.

Blue Lagoon Iceland
Iceland is an appealing destination, but maybe just once? Photo: PXhere

So, aside from the WOW factor, Iceland was seeing a decrease in the number of visitors to the country. Why? Well, Iceland is an incredible place, but it’s not all that big. For many travelers, once they’ve been to Reykjavik, seen a geyser, snowmobiled across a glacier and swum in the Blue Lagoon, there’s not much left for the average, time-poor traveler to aspire to.

Of course, the intrepid traveler could spend months exploring Iceland and still not see it all. But for your average working person with a limited amount of holiday available, Iceland is somewhat expensive and a one, or at best two, time stopover choice. USA Today report that global searches for Greenland on hotel websites rose by 52% in 2018, and other destinations including Ireland, Japan and Turkey are enjoying an uptick in North American visitors too. It seems that, maybe, people are ready to move on to other interesting destinations.

Absolutely, the loss of the ultra low cost fares contributed to the decline in tourism, but as well as this, perhaps it was coming anyway. With certain Icelandic investors looking to set up another ULCC in the country, one has to wonder whether that’s a model that still has a place in today’s market.