Icelandair Set To Cut US Capacity By 10%

Despite forecasting positive growth in 2020, Icelandair is struggling in some quarters. The carrier now admits its US capacity may fall by 10% in the coming months.

Icelandair jet landing
Icelandair pares down some US routes in response to market trends. Photo: Pedro Aragão via Wikimedia

Writes, the country’s flag carrier yesterday revealed its hopes and dreams for 2020. But in tandem with its prediction of a 2% increase in flights within Europe, Icelandair admits its US routes are not paying off.

Some Stateside destinations have already been crossed off the manifest, contributing to the airline’s woes. Icelandair’s latest prophesy is that US-bound seating capacity will fall by 11% in 2020.

Icelandair currently serves 40 destinations worldwide. From those destinations to Keflavik the carrier brought an estimated 1.6 million passengers between January and October. It hopes, reports, that passenger demand continues on the up, and speculates a 2% rise in European route frequencies next year.

The airline has already revealed its intention to increase flight frequencies between Keflavik and Copenhagen, Helsinki, Berlin, Zurich, Madrid and Milan. At the same time, routes between Paris, Frankfurt and Hamburg will be curtailed.

We have contacted Icelandair for comment.

United States problems

In October this year, we reported on Icelandair’s announcement that it was axing flights to Kansas and San Francisco. For the closure of the route to the former destination, the airline laid the blame firmly on the grounding of the MAX. It was unable to fly its 757 back and forward for a big enough profit.

737 MAX jets stored
Flights to San Francisco and Kansas terminated due to MAX grounding, says Icelandair. Photo: SounderBruce via Wikimedia

Reports, an Icelandair spokesperson said of the move, “The main objective of this work is to improve the performance of the route system and to minimize the company’s risks due to Boeing 737 MAX aircraft being detained.

Overall performance

True, the MAX’s grounding certainly won’t have helped matters, but the overall performance of the routes was poor as well. WOW’s demise had had (and continues to have) a detrimental effect on Iceland’s North Atlantic trade.

Now with fewer operators flying between the US and Iceland, WOW’s exit leads some to predict transatlantic passenger numbers to fall by almost half in the upcoming winter period.

That expected trend won’t help Icelandair which is still struggling to fill the void left by the ultra LCC. According to CAPA, the carrier’s North America seat count is scheduled to fall by 2.3% this winter.

WOW demise

Icelandair’s market share should improve over time, especially with the loss of WOW, but at the moment it is static. The airline reported a net loss of $89.4 million in the first half of 2019, despite WOW’s closure in March of this year.

WOW jet on ground
WOW may have been short-lived but it raised the profile of Iceland like no other. Photo: MercerMJ via Flickr

At its height, WOW was responsible for a meteoric growth in Iceland-bound capacity. However, the airline’s mode of operating was based on an artificial and untenable model. And the demand seen of the WOW period was not a true indication of the Icelandic market reality.

Couple the void with the loss of the MAX (and thus the opportunity to fly cheaply to and from the island nation) and Icelandair should not be surprised by the flat wake.

Trouble ahead?

A proposal is being bandied around of a return to the skies of an Icelandic LCC called PLAY. The airline hopes to begin ops in the spring of 2020 with six aircraft.

If PLAY comes to fruition it could spell further trouble for Icelandair, especially in light of the flag carrier’s current inability to reap the benefits of the demise of WOW.