Will Cheap Iceland Stopovers Soon be a Thing of the Past?

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In the last six years, the Icelandic stopover has become a kind of perk of the job for those flying Europe to the East Coast. And both WOW and Icelandair offer a huge number of opportunities between destinations. But with profits tumbling, many are worried these could this soon be a thing of the past. As they say, you don’t know what you’ve got till it’s gone. So let’s take a look at what’s going on.

Anyone who’s ever used American Express Travel to find a cheaper Business Class or Premium Economy to Europe, will have seen the offer. If you unclick ‘direct’ something magical happens. The option to fly into Keflavík Airport for a stopover comes up. It’s cheaper than direct and means you could spend and afternoon in the Blue Lagoon.

Icelandair were the first to offer the deluxe add on. WOW were soon to follow. As a result, both were able to increase passengers, routes and revenues. It’s been a relative money spinner. Even in the last 12 months, WOW and Icelandair have both dramatically increased their route networks.

With a fleet of 36 aircraft, Icelandair currently brings passengers in from 23 US cities including: Boston, Chicago, Dallas/Fort Worth, New York JFK and even San Francisco. WOW’s 20 aircraft has some destination crossover plus the cheap seats from Cincinnati, Detroit, Pittsburg and St. Louis. Both airlines rate well with customer satisfaction and both have been bounding. While their product is similar  they also different. Icelandair is more in the flag carrier range, WOW a little more of a LLC. But two big airlines is quite a lot to support. Even if they’re not huge, considering the size of Iceland, it’s like having two major airlines based in Toledo, Ohio.

Is it sustainable to have two major airlines in Iceland?

In a few words, perhaps not. The tail end of 2017, going into 2018, has been a tough stretch for both airlines. For the first time in a while we saw Icelandair losses. In the second quarter of 2018, Icelandiar lost $25 million. The smaller WOW Air also suffered a net loss of $22 million.

Icelandair losses and WOW losses mean changes are needed

The news must come as a shock to shareholders and passengers alike. But in typical take-action style, Icelandair are getting on with it. They took the immediate step of selling off their hotel business. In addition, one domestic route to Akureyri has been axed. Three international routes comprising of one to Greenland and two to the UK, will also go. There’s also the rumour of an aircraft for sale.

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By comparison, their budget sibling WOW Air has not announced any immediate plans to make cuts. This is probably due to their lower running costs. They are already pretty low-fat and efficient. They will, however, suspend flights to Tel Aviv.

So for now, we are seeing some scaling back of flights to Iceland, but as of yet this hasn’t impacted the stop-over route. The opportunity to fly through Iceland is a unique product only WOW and Icelandair can really offer. The airlines have genuinely found a way to take revenue away from the likes of BA and Delta. Personally, I think they’d have to be mad to let go of this.

 

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