The CEO of Icelandair, Bogi Nils Bogason, has spoken out against the introduction of a proposed fee of ISK 200 ($1.46) per passenger, claiming that the tax would reduce the airline's competitiveness in the lucrative Transatlantic market.
Iceland's Minister of Infrastructure wants to introduce the tax, which would raise an estimated ISK 1.5-2 billion ($10.9-14.5 billion) annually. The money would be put towards the country's airport infrastructure, particularly in the development of alternative airports away from the main hub of Keflavík International Airport (KEF).
The existing airports of Akureyri (AEY) and Egilsstaðir (EGS) are too small to handle the country's substantial number of flights in the event of Keflavík International Airport being closed. Currently, alternative airports are occasionally used in the UK and Norway. However, both countries are quite some distance from Iceland, meaning that aircraft have to carry a significant amount of extra fuel in case of diversion, resulting in higher costs and increased carbon emissions.
A negative impact on Icelandair's competitive advantage
Taking advantage of Iceland's geographical location between Europe and North America, Icelandair has positioned itself as a key player in the Transatlantic market, offering flights across both continents from its hub at Keflavík International Airport. According to Bogason, the introduction of the tax would make the airline less competitive against carriers flying directly across the Atlantic, to which the fee would not apply.
The Icelandair CEO was also keen to highlight that the airline's fleet of primarily narrowbody aircraft is generally more fuel-efficient and less polluting than the widebody aircraft generally used for direct Transatlantic flights. This is likely referring to Icelandair's growing fleet of young Boeing 737 MAX aircraft, rather than its aging Boeing 757s and 767s, which have an average age of 25.4 years old, according to data from ch-aviation.com. The airline is, however, in the process of renewing its fleet, with plans to replace the older aircraft, and it recently signed a Memorandum of Understanding (MOU) with Airbus for 25 A321XLRs.
Find out where Icelandair is flying its passenger Boeing 767s this summer with this report from the Simple Flying team.
Further concerns raised by Icelandair
Icelandair raised further concern over when the fee would be introduced, arguing that it should not be immediate. The airline sells tickets at least 12 months in advance, so it would prove challenging to collect the fee on tickets already sold.
In addition, Bogason hinted that prioritizing the development of alternative airports could lead to delays in the expansion of Keflavík International Airport. That said, Icelandair is still finding the room to grow - later this summer, the carrier will launch flights to three new destinations - Prague (PRG), Detroit (DTW), and Chania (CHQ).
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What do you think of Iceland's proposed tax of ISK 200 ($1.46) tax per passenger to contribute towards developing the country's airport infrastructure? Do you agree with the idea? Let us know by commenting below.
Sources: Aviation24.be, ch-aviation.com