Icelandic low-cost carrier PLAY has announced it will be making some fundamental changes to its model and route network as the airline forecasts that earnings in 2024 will fall below market expectations.
The fallout is likely to see the airline shift its focus from acting primarily as a connecting carrier for passengers between Europe and North America to concentrating on serving point-to-point leisure routes between Iceland and points across Southern Europe, a sector in which the carrier has expanded hugely in 2024.
The carrier says that its yield on hub-and-spoke operations on routes across the Atlantic has been disappointing throughout 2024 as many other carriers have poured extra capacity onto some key transatlantic routes while opening up new services on others. This drop in yield is evidently causing PLAY some financial concerns and reluctant to fall into the same trap as its Icelandic predecessor WOW Air is taking steps now to mitigate the issue.
As reported by AeroTime in September 2024, PLAY’s results for August 2024 show that 25.9% of all passengers were departing from Iceland, while 35.6% were flying to Iceland as their final destination, with 38.5% being connecting passengers using Keflavik Airport (KEF) in Iceland as their connecting point between PLAY services to Europe and North America.
Due to this concern, the airline has indicated it will be significantly cutting back its capacity on its North Atlantic routes, a process that will start immediately and continue into 2025. The carrier currently serves five destinations in North America – Boston (BOS), Baltimore/Washington (BWI), Washington Dulles (IAD), New York-Stewart (SWF), and Toronto/Hamilton (YHM).
An airline statement implies that Miami-based operator GlobalX will take over the operations of its five transatlantic routes from November 1, 2024, until March 31, 2025, after which their continuation appears unclear.
The airline has expanded rapidly on routes to Europe throughout 2024, announcing flights to such destinations as Madeira, Pula, Split, Valencia, Faro, Aalborg, Cardiff, Marrakech, and Vilnius. The carrier will also add flights to Turkey for the first time in 2025, having just revealed flights from Iceland to Antalya starting in April 2025.
Maltese AOC
In line with the planned network changes being planned, PLAY intends to deploy a part of its fleet outside of Iceland for the first time. To support this strategy, PLAY has applied for an Air Operating Certificate (AOC) in Malta. According to an airline statement, this process is expected to be completed by spring 2025.
The plan will see PLAY move its first aircraft under the new Maltese AOC to Tenerife, from where it will be operated to Keflavík and Akureyri in Iceland and to other destinations. Following these changes, PLAY expects to operate six or seven of its aircraft on its Icelandic AOC while the remaining three or four will operate on the Maltese AOC.
According to PLAY, the airline’s financial position remains secure, and there are no current plans to raise capital. However, PLAY’s earnings before interest and tax (EBIT) for the full year of 2024 are now expected to fall below the results for 2023. PLAY has indicated that it will provide further details on these changes during its Q3 presentation, which will take place on October 24, 2024.
“Since PLAY’s inception, we’ve observed shifts in the market, and it is our view that the via-route network is no longer as profitable as it once was,” said Einar Örn Ólafsson, PLAY’s CEO. “As a result, we have decided to adjust our business model, which will take effect around mid-2025. PLAY remains the airline of choice for Icelanders, and we aim to increase our share in the local market.”
“We will focus on the aspects of our business that have proven both successful and profitable, namely transporting passengers between Southern Europe and Iceland. PLAY currently operates a fleet of 10 aircraft, but with these changes, about six to seven will remain under the Icelandic AOC, while three to four will be allocated to other projects,” he added.
“One aircraft will be temporarily leased to Miami, and we are exploring a year-round project that we hope to announce soon. I am confident that these adjustments to our business model will allow us to grow, ensuring PLAY remains a top choice for travelers,” Ólafsson concluded.