The WOW tourism-based Iceland hub strategy is not dissimilar from that of IcelandAir. But by staying clear of big hubs, planning for sustainable growth and keeping fares low, Mogensen has mapped-out his flight path in favorable winds.
What’s the best way for a low-cost carrier to gain transatlantic routes? If you ask WOW Air’s CEO and sole owner, Skúli Mogensen, the best flightpath for success is the path of least resistance.
For WOW, the least contentious and most efficient path is also blessed with breathtaking, otherworldly vistas and plentiful unspoiled nature.
We had a chat with Mogensen about his competitive strategy for the transatlantic market, WOW’s travel services, and what matters most to him for WOW Air, and Iceland, beyond tomorrow. We were treated to honest answers from man who knows his business and loves his country.
After great success in the tech and telecommunications sectors, Mogensen took his diverse professional background and business savvy, to invest in the tricky business of running an airline. Mogensen tells us he saw many opportunities for WOW.
“It was a combination of a few things,” he says. “One, the incredible growth in tourism to and from Iceland, where we only had one legacy carrier, basically having a monopoly on many of the most popular routes. I saw a great opportunity to lower prices and give people better service. Secondly, and probably even more interesting to me, is the fact that no one had truly offered a low-cost alternative across the Atlantic.”
“By using Iceland as a stopover hub, we can offer transatlantic flights at a much lower cost. Last, which is also very important given my background in technology, the internet has already transformed the travel industry quite significantly. Today, travel is the number one e-commerce category online. As far as we are concerned, we still believe there is room for a lot of improvement on how people choose and create their own travel packages.”
“We see a lot of opportunities also in how to apply technology and mobile phones to improve customer service, keep more flexibility, etc. A combination of these elements make this [venture] very attractive. And so far so good.”
Though adopting an ultra-low-cost carrier, charge extra for everything model, WOW differentiates itself with a focus on “happy.” Passengers are called guests, and ensuring guests have a good time is the priority.
“I like to say it does’t cost anything to smile,” Mogensen tells us. “Even if we have followed the low-cost model we have really tried to make the flight experience enjoyable. The website easy to use, and, yes, we do charge for additional services, but we do make that very clear. There should be no unpleasant surprises along the way.”
“On the contrary, we really try to have a very friendly, happy, smiley, crew onboard. That’s something I’m very proud of. That’s worked very well for us. And the feedback that we’ve gotten is fantastic.”
Part of that fantastic feedback has come through WOW Air’s #WOWMoment social media campaign which encourages passengers to share their images and videos.
— WOW air (@wow_air) December 4, 2014
— WOW air (@wow_air) December 5, 2014
“From day one we had the #WOWmoment competition, where we encourage our guests to record, photo, share their travel experiences with friends and family, but with us as well,” Mogensen says. “If we use some of their footage we reward them with free tickets, etc., We have received a tremendous amount of great pictures, and often the best moments are by hobby photographers. Effectively, a true moment, not an advertising moment. That’s worked very well for us.”
Though enjoying impressive growth, with “guest” numbers quadrupling from 2012 to 412,583 in 2013, WOW Air is a small carrier, with a fleet of four A320s and 170 employees. Mogensen tells us the airline will expand to six aircraft in 2015 and 10 aircraft by 2016. This would still make WOW less than half the size of today’s IcelandAir fleet, and much smaller player than transatlantic Norwegian, or European competitors easyJet and Ryanair. But this smaller size is in line with Mogensen’s plans for sustainable growth. He has not set out to build a Low-Cost behemoth; more an LCC-holiday-carrier hybrid, whose hub-and-spoke routes will guests to Iceland, encouraging them to stay a while.
“Tourism to Iceland could easily double in the next few years,” Mogensen tells us. “Iceland is a large country. There’s a lot of still unspoiled beautiful, spectacular, incredible destinations that have not really been popularized.” Recent media attention, he tells us, has generated great interest in the island nation, with manageable growth. “Of course, nothing can grow forever. The far greater opportunity is the 50 million annual transatlantic market, which has almost no Low-Cost Alternative available today. We think that, realistically, 20-30% of the transatlantic market could be served by LCCs in the coming years, and we certainly hope to be one of those carriers.”
The share of the transatlantic market which Mogensen believes is up for grabs by LCCs may encourage others vying for these routes, and distress legacy carriers clinging on to them. The ongoing struggle of the legacies to defend the transatlantic has caused headaches for other Nordic carriers, but Iceland, Mogensen points out, has an advantage.
“IcelandAir has been using Iceland as a hub a long time. We are an Icelandic airline, operating under Icelandic license, and, as such, have the same access,” Mogensen says. “We are not targeting the most popular routes, where there are direct flights.”
Instead, WOW Air will concentrate on secondary routes, where connections are the norm. “More than 50% of [transatlantic] passengers need to make one or more stops to get to their final destination. I don’t think that will change any time in the immediate future, because it’s not viable to have a large Dreamliner aircraft do a daily direct flight between two medium sized cities.”
Mogensen also wants WOW’s guests to spend a bit of time—and money—enjoying their connections, and the company is ready to make that happen. “One of the things that is nice is that you can get more out of your vacation by stopping in Iceland,” says Mogensen. “You’ll have two destinations in your itinerary, not only one.”
Given Mogensen’s background, it’s no surprise that he focused WOW Air’s travel department around technology. He believes the flexibility of technology-based travel bookings is increasingly attractive to WOW Air’s guests. “I like to say that we like to help people help themselves. You, as a customer, should always have a wider variety of choices and flexibility. Some people simply like a fixed package, but we clearly see a trend towards having more choices in how you customize your own package.”
But Mogensen’s desire to grow WOW Air, encouraging stopovers in Iceland, is tempered by awareness of tourism’s ecological impact. “Protecting Iceland is something that is very important to me. I’m not worried about us doubling in size over the next five to ten years, because Iceland is large enough.” Though, Mogensen emphasizes, local awareness of necessary infrastructure, setting quality standards, managing traveler expectations, and distributing demand year round are key.
“It would be a horrible mistake if we, in a short-sightedness, or in a gold-rush mentality, would simply make everything wide open—rush as many of the people as we possibly could in the short-run—if that would ruin in the long-term health of these destinations,” Mogensen says. “We need to have long-term thinking.”
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Photo Credit: WOW Air CEO Skúli Mogensen WOW Air