One of the highest profile airline startups last year came from Iceland. PLAY Airlines is following the steps of the late WOW air by running a hub in Keflavík, driving connections from Europe to North America and vice-versa.
With most of the senior management coming from WOW, there is still much doubt over the airline’s prospects, and it is with this in mind that the startup’s CEO, Birgir Jónsson, attended the CAPA Airline Leader Summit 2022, in Manchester.
Aviacionline managed to steal 15 minutes of his very schedule to talk about the company. Some fragments were altered in order to keep clarity.
Aviacionline: So first of all, of course, the obvious question, how is war affecting PLAY right now? Not only in fuel prices, but rather in capacity and demand, did it affect at all?
Birgir Jónsson: No. The short answer is no. We do not have any destinations in that region. So the capacity or the demand has not been affected at all, we were a little bit afraid that because we were focusing so much on the US market, that US consumers would kind of think that Europe is dangerous, «there’s war in Europe» or something like that.
We have not seen any, any, any impact on that. Rising oil prices is a problem for everyone — it’s an equal problem. So the only thing that will happen is that I think prices will just go up there.
AL: Prices of oil — [would] affect [you] versus the others, because you could not hedge, if you didn’t have the time.
BJ: Most of our competitors are unhedged — the ones that we are in direct competition with. So like I said, it’s an equal problem for everyone, but it’s still a problem. Yeah, of course. Versus the volatility. You know, if the prices are just at a level or, or these huge kind of sweeps.
AL: How’s the business doing right now?
BJ: We are in a startup phase. I mean, we started our first flight last June and we launched kind of a very limited, flexible, network point-to-point to and from Iceland.
The big step for us is now this month, actually [in] two weeks time on the 20th of April, when we launch transatlantic [flights] and the hub-and-spoke model. And what we see in the bookings is that we are almost back to a normal year, that the trends look… I figure the way the market is behaving is what we could have expected, like pre-COVID.
AL: Did you expect anything that could bring you to profits this year? Or what is the plan right now? Because last year you burned a lot of cash naturally with the startup.
BJ: Yeah. I mean, we started out, we actually did the IPO on the NASDAQ First North Market in Iceland before we started. So we are extremely well-financed and we are financed to weather this kind of fluctuation.
So now we’re just focusing on getting the model and getting the operation kind of smooth functioning. We will be profitable [by the] second half of this year, but that’s because we are launching a completely new business model from the middle of the year. So first half of the year [is] kind of [a] preparation phase. But we do expect to be profitable in the second half.
AL: What about the transatlantic sales — is there any surprise for good and for bad?
BJ: Uh, no, not really. I mean, like I said, basically the market is behaving like it did before COVID, we launched a [flight to] New York Stewart airport, which many people find an interesting position.
That’s maybe the biggest surprise how well that is done, and how easy it has been to sell that option to, for example, the European market.
AL: But is it based on price — do you think that this is [bringing] more customers for the position of the catchment of the airport, or because you are selling it as New York?
BJ: Well, it is classified as a New York airport. It’s owned by the [New York] Port Authority. So actually. When you basically calculate the cost, the time that you would spend, like standing in line [for] immigration, getting back from JFK or something, we’re talking a matter of maybe 10, 20 minutes, it takes longer [than] to get into Manhattan.
If you’re going there, then also not everyone is going there. I mean, there’s millions of people that live around the airport who want a direct route so for us, it’s a perfectly logical airport. If you’re coming from Europe and you want to take your family to New York, you are saving $150 per person. That matters to many people that I know.
AL: But it must be very difficult for you on the other side, to sell from the US to Europe. Are you focusing at all in this market or at least growing?
BJ: We are focusing a lot on the US side and I think probably 70 percent of our bookings are US-based.
AL: And what’s the secret?
BJ: Understanding the digital environment, kind of knowing how to target customers and how to direct arts and how to be present on all. We’re kind of all over meta [web]sites. And basically when you are in Boston and you go Boston-Paris in Google Flights or something, our strategy is to be at least top three or two.
And there is a huge segment of the market [where] you need to have that, because I think that air travel is becoming a commodity, you know, and, and you know that everyone, like we were just discussing [in the forum], everyone has the same aircraft, you know, the experience on board is pretty much the same, we all have the same safety regulations, you know, and people.
So growing kind of a part of the market is simply looking at the convenience and price and that’s all only, because we cannot offer anything different, if not low price.
AL: At the same time, your network options are very unique. I was searching on Cirium just now and on April you do not overlap at all with Wizz [Air]. Is that a conscious option?
BJ: Yeah, absolutely. Because there’s no way a Scandinavian company paying Scandinavian wages at a very high cost airport… there’s no way that we could go into direct competition with Wizz.
But it’s impossible to be: we just have to kind of find a way around them and of course there are some people that would like to have more space or basically have Other features of the product, if not, it’s not only about the price, but you know, our way to survive is to be flexible and structure ourselves around the competition.
For example, offering people to fly from Liverpool to Stuart. I mean, we cannot compete with the guys that are flying directly from New York to London. I mean, there are so many big airlines, big capacity there. So we have to find something else.
AL: So you’re essentially a niche carrier.
BJ: Yeah.
AL: So is this why you will open a branch in Eastern Europe?
BJ: We opened an office in Vilnius in December for a few reasons. Number one is that, just what I said before, [because] most of our passengers are not Icelandic, so it’s really dangerous to have pure Icelandic focus in the management team.
And we need to think of [PLAY as] an international company, because if you’re only looking at five or 10% of the people that may be using the US flights are Icelandic. And if the whole marketing people in the management team is looking at those five or 10, who is looking after the big, big segment? So we’re getting a lot of internationally minded people there.
There’s a lot of aviation experience in Lithuania. It’s a hub for aviation in Europe. Iceland is a really small country. We don’t have those kinds of people just working in Reykjavik. Obviously there’s no secret that it’s a lower cost base than that in Scandinavia, but I would say that we’re getting better, more qualified people. And then we are available in such a small place like Iceland, because we can only have them from Icelandair or the likes.
AL: Your network and Wizz’s compliment each other. Don’t you see a partnership coming?
BJ: Not now, but in the near future, a medium, long-term.
AL: Are you in talks with anyone?
BJ: I would not say official talks, but there has been kind of, let’s say some «feeling», and it’s not a big part of our model [or] something that we would be really interested in. What we are more focused on is, trying not to get too complicated and it’s difficult enough to operate this hub-and-spoke system without adding, you know, late incoming aircraft from someone else, you know. Passengers are waiting.
What do you do? Right. Another layer of complexity to the operation. So we want to kind of get our operation smooth and running before we take.
AL: But just to be clear, this «feeling» was with Wizz.
BJ: No, um, I can’t tell you that, but I mean, many people like yourself have obviously seen the routes and see it.
See the number of passengers that are potentially. So this is very soft discussions, but nothing, nothing to announce. We’ll talk about getting any kind of concrete [agreement] now into America.
AL: What are the next steps? Any destinations you are negotiating or is what you have now all for this summer?
BJ: Yeah, well, this summer, I mean, we are, I think another four aircraft for an extra long, we would have 10 of that, it simply means that we will add more destinations in Europe.
We will have frequency and we will have a few more destinations in the East Coast and Canada. For us, it’s really critical not to break that because we want to be able to utilize the aircraft overnight, you know, the business model where we go in the afternoon to the US [and] we’re back like six in the morning and we do a return trip to Europe.
No further than the East Coast and we have to kind of break the bank. So we will have more destinations on the, on the East Coast and…
AL: …so are you satisfied with the number of destinations you have now [so that] the next summer, you’re just going to increase the frequencies [to the existing destinations]?
BJ: Both of it. We will definitely introduce some new destinations, but there will be more frequencies because that’s… in fact, it came up in discussion. We had, it’s all about the frequency on you when you’re kind of doing that connecting thing with the US. You have to have daily flights to the destination. So we will — it will be a mixture of new destination and frequency.
AL: So with the current size, can you break even this Summer or not?
BJ: Yeah, like I said, we will be profitable [in the] second half of the year.
AL: So pushing forward, let’s go to summer 2023. Where do you want to be?
BJ: I mean, the main thing is to have a structured and focused operation. We have a really clear business plan up until 2025. And we’re just focusing on executing that profitably for sure.
And just keep keeping the whole thing, keeping the machine running from you and not have too grand ideas about being the biggest or most famous or something. We just want to be small and flexible. Adamant profitable.
AL: We all know that you’re not going widebody, but what’s the one thing apart from this one that differentiates PLAY and WOW?
BJ: WOW was actually doing really well until the point where they introduced the widebodies. So that was a clear mistake.
The other thing that they did wrong was that they were owned by one guy […] I mean, we are a listed company. We have 4,000 shareholders. So all our decision-making, all our approach is much more disciplined and focused and kind of maybe a little bit more boring.
But that kind of approach to a business that has such a small margin is really important. So that is, I think, the biggest difference; it’s just how the company is run, how decisions are taken.
