Transport Airlines

Iceland’s Wow Air Expanding to U.S. to Build Tourism Market

Nov 06, 2013 12:30 am

Skift Take

Icelandair and Iceland Express already know what they’re doing in the U.S. Can WowAir improve on this?

— Jason Clampet

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Icelandic carrier Wow Air said it may buy Boeing Co. 757 or Airbus SAS A321 jets to bring more U.S. routes within range of Reykjavik and help rebuild a tourism industry after the country’s financial collapse five years ago.

The discount carrier is evaluating flights to destinations in eastern North America and will tomorrow announce a service to Boston, its first route beyond Europe, founder and Chief Executive Officer Skuli Mogensen said in an interview.

Building a U.S. network would boost Wow’s share of the burgeoning Icelandic tourism market, which grew 20 percent last year, according to Mogensen, while opening up one-stop trans- Atlantic connections like those offered by Icelandair. Wow’s Airbus A320 planes have a range of 6,000 kilometers, 1,000 km less than Boeing’s 757-200ER, which can reach Florida.

“One of the reasons we’ve started with Boston is because it’s within range but we are actively looking at what aircraft would be the most suitable for new, longer destinations,” the CEO said. “I’m very excited about adding North America,”

Boeing’s 757, the world’s longest single-aisle plane and the mainstay of Icelandair’s fleet, is “perfectly suited” to U.S. operations though having ended production in 2004 is “getting outdated,” Mogensen said in London, where he was attending the World Travel Market industry expo.

Fuel Tanks

The A321 is also an “interesting opportunity,” he said, which when equipped with extra fuel tanks, can match the A320’s range while carrying 185 passengers, about 15 short of the 757.

Wide-body aircraft aren’t attractive because they wouldn’t fit with European routes, Mogensen said. While the current fleet is hired from Bulgaria-based Air Via, which also provided pilots until Wow secured its own operating certificate last month, the carrier is keen to add new planes in line with low-cost norms and is exploring both direct purchases and leases of new jets.

Wow, which consolidated its position with the purchase of discount rival Iceland Express a year ago, operates its winter schedule with three A320s, serving eight cities. The airline had four planes in operation during the busier summer season, when it flew to 14 locations, and will move to five A320s next year, helping it to add services to Stockholm, as well as Boston.

Mogensen said he’s less focused on transfer traffic than Icelandair, which has 12 North American routes and 24 to Europe.

Economic Revival

“I think Icelandair is now selecting new destinations that really have nothing to do with Iceland,” he said. “That’s where we differ. The main driver for us is the growth of tourism to Iceland, though I do think North America will also strengthen our European destinations using Iceland as a via-hub.”

Wow destinations include London, Paris and Berlin, together with Poland and Lithuania, which provide migrant labor, a couple of Mediterranean resorts and a ski route to Salzburg, Austria.

Iceland’s turnaround since an $85 billion bank default in 2008 has been spurred by a weaker krona that’s made prices cheaper for visitors. An economic revival and volcanic eruptions have attracted adventurous travelers.

Wow faces competition from more established carriers including EasyJet Plc, Norwegian Air Shuttle AS and Air Berlin Plc, as well as from Icelandair, whose stock has surged 94 percent this year following a 63 percent gain in 2012 for a market value of 80 billion Icelandic kronur ($650 million).

Opening up North America will reduce Wow’s reliance on a crowded market while targeting a market that accounts for 25 percent of all Icelandic air travel, according to Mogensen.

Some 17 airlines fly Iceland-Europe during the summer and five or six continue operating through the winter, he said, while only Icelandair and Delta Air Lines Inc. serve Iceland- U.S. routes in the summer and Icelandair alone in the winter.

With assistance from Robert Wall in London. Editors: Benedikt Kammel, Jacqueline Simmons. To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net. 

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