When the Icelandic startup cancelled all flights last week and suddenly shut down airlines, the news felt almost anti-climax. The ReykjavΓk-based carrier, launched in 2021 on Kicky Red Logo and High Hopes, had already eliminated its transatlantic service to the US East Coast due to a decline in revenue. Services at the remaining US Gateway, Baltimore/Washington Airport, were scheduled to end on October 24th.
The Play shutdown is because some US-based, low-cost carriers have reached turbulent stretches. Most notably, the spirit that entered bankruptcy for the second time in August within a year. Less-known LLCs are also struggling, such as Silver Airways, a regional line that operates flights from Florida to the Caribbean. I pulled the plug in June.
This topic sparked conversations in the industry. United Airlines CEO Scott Kirby recently said at an airline meeting that the airline’s budget model is doomed, describing several media sectors as “sinking ships.”
But does Play’s recent shutdown provide another example of how budget airline business models are at risk, with formulas that provide cheap fares and no-frills experiences?
Craig Jenks, president of Airline/Aircraft Project, a consulting firm in New York, warned against reading too much of the End of Play Mise.
“The problems faced by play and its predecessors are mostly endemic to Iceland,” he said, noting the geography of the country as a small island nation with a population of 400,000 and a limited domestic market.
Pray vowed to establish himself as the successor to Wow, another closed Icelandic career, and avoid mistakes in its predecessors. In addition to transatlantic routes, the airline has a robust network serving Western Europe, sharing a bullish outlook earlier this year. But that wasn’t enough to float. After all, with this type of model, carriers can only succeed with strong traffic when connecting flights.
“We believed that Wow and Play could compete with Icelandair in the connected market between North America and Europe,” Jenks said. “We tried it with fares that are unfair,” says Stewart Newberg, who is about 70 miles north of New York City. Ultimately, the country’s longtime flagship airline, Iceland Air, was the only one to win.
Survive in unstable markets
One of the main challenges faced by budget careers is that the availability of basic economic fares offered by legacy airlines such as Delta and United have significantly erode the advantage of low rates.
Internationally, the outlook is also mixed. While some established budgeters like Ryanair and EasyJet are still strong, Play offers a warning story. Like other decommissioned budget airlines, it was initially accepted by price-sensitive travelers to Europe.
Other examples include Primera, a Scandinavia-based carrier that became a bust a few years ago, and it worked well for a while until 2021 stopped all transatlantic routes.
“In Europe, low-cost airlines are doing well,” Jenks said. “They don’t face what the general issues (their counterparts) face in the US,” including tough competition with major airlines.
It is also worth remembering that the end of the airline sector in the budget was previously declared. After the industry was deregulated in 1978, a wave of poor, low-cost careers challenged legacy airlines, staying competitive at a much lower cost than their much larger rivals. However, for a while, within a few years, most people disappeared. They had no capital to withstand the boom and bust cycle that plagued the industry every decade.
However, these infamous, unstable market conditions have not discouraged some entrepreneurs. JetBlue founder David Neeleman founded Breeze Airways more than four years ago, and the Utah-based carrier launched its first international flight.
Meanwhile, Frontier is one of the budget airlines that has responded to increased passenger demand after the pandemic for more premium products by deploying premium class seats that are wider and more comfortable than regular seats.
“People have changed in this country,” said Barry Biffle, frontier chief at a recent industry gathering.
In other words, the surviving, low-cost airlines may be more similar to their higher-cost brothers.