There’s a strong sense of déjà vu in the skies over the North Atlantic. Icelandic startup Play Airlines debuted on the Nasdaq First North stock exchange on Friday with an eye on picking up where Wow Air and Norwegian Air left off.
Play is a near carbon copy of defunct Wow: It will connect points in North America and Europe over a Reykjavík hub cheaply with new Airbus A321neo aircraft, with the key difference of doing it profitably this time. The near identical business plan is no fluke, Play was founded in part as a “restoration” of collapsed Wow in June 2019, just three months after its predecessor closed its doors. Play is led by a who’s who of former Wow leaders, including CEO Birgir Jónsson, who was deputy CEO of Wow, and Chief Operations Officer Arnar Már Magnússon, who was vice president of operations at Wow.
Play’s public offering was eight-times oversubscribed when shares went on sale on June 25, the airline said. However, in what is likely a more realistic market view of the startup, its share price fell 5 percent to 24.7 Icelandic krona ($0.20) during its first day of trading on Friday.
Successful long-haul low-cost service across the Atlantic has long been a dream of airline entrepreneurs. Before Norwegian, which shed its long-haul operations as part of a court-led restructuring in January, and Wow, there is a long list of failed attempts from Laker Airways in the 1970s to People Express in the 1980s. At issue is the need for consistently high load factors to turn a profit on cut-rate fares; something that is difficult outside of the peak summer travel season across the Atlantic. That does not mean entrepreneurs are not eager to keep trying, with Norwegian-clone startup Norse Atlantic Airways also hoping to crack the market.
Play , and Norse Atlantic — if it gets off the ground, face formidable competitors. Nearly every major transatlantic carrier, from Air France-KLM to United Airlines, have cut millions — in some cases billions — of dollars in expenses with an eye on emerging from the crisis leaner than before. Play’s prospectus argues that, despite these savings, competitors will face higher unit costs post-Covid due to lower capacity — setting up something of a cost battle in the coming years. Play targets a low 3.6 cent costs per available seat kilometer (CASK) excluding fuel by 2023.
The assumptions are not entirely off base. Historically, major carriers have retrenched after crises, leaving the door open to new entrants or smaller competitors to expand and scoop up marketshare. However, the influx of billions of dollars in state aid in both Europe and the U.S. means incumbents are defending their turf and not retrenching as they have in the past.
Play’s financial outlook is equally rosy. The startup anticipates only one annual loss of $15 million this year before turning a profit of at least $4 million from 2022. Revenues are forecast to grow from $25 million this year to $509 million by mid-decade.
And in addition to the European and North American heavyweights, Icelandair is ramping up service after its own Covid-19 hiatus. The airline has cut costs and resumed its fleet renewal program with Boeing 737 Max aircraft. It recently returned to Minneapolis-St. Paul and plans to resume service to Baltimore in April 2022.
Play began flights to London Stansted on June 24 and expanded to Tenerife by the end of the month. Alicante, Barcelona, Berlin, Copenhagen and Paris Charles de Gaulle are due to join its map in July. The airline has leased three A321neos from AerCap.
But Europe is only half the puzzle. North American flights are due to begin by April 2022 — though Play has yet to seek foreign air carrier permits from either the Canadian or U.S. governments. The airline has not disclosed what cities it could serve in the Americas; however, when Wow shut down in 2019 it flew to Baltimore/Washington, Boston, Detroit, Montreal, Newark and Toronto. Play’s Chief Network Officer Daníel Snæbjörnsson was vice president of network planning at Wow.
Play plans to expand its fleet to at least six A321neos by the time it begins North American operations.