LONDON – Over the weekend, AviationSource got to sit down with PLAY CEO Birgir Jonsson to talk about a year of continuous operations.
June 24 represented the anniversary, which coincidentally, fell on the same date as the birthday of the Editor-in-Chief James Field.
In this interview, we went over the airline’s last 12 months, as well as a concrete look at the future, which includes a possible future with the Airbus A321XLR.
The Interview…
JF: Birgir, thank you for taking the time to speak to me. Looking back at a year of operations, what have you learned in that time?
BJ: Wow! That’s a big question to start with. One thing that I have learned is about being careful and taking smaller steps as well as having a more focused approach rather than trying to eat the world in one bite.
One lesson we have learned is to utilize our aircraft all the time. We had three aircraft to start with, and we didn’t utilize them fully. The lesson from that is to walk before you run basically.
JF: Do you feel you have identified areas for improvement in operations based on the last 12 months as well?
BJ: I mean, we are just a new company. We have a lot of things to do, but we are humble about where we have got to now. I can’t really think of anything that sticks to mind.
JF: We have obviously seen the Icelandic airline market filling up with other carriers. We have the likes of Icelandair that are much larger and can afford to run lower profit margins. With PLAY, the airline is serving secondary destinations, as is being seen with Liverpool later this year. What makes you feel the secondary routes will work when compared to the more established primary routes?
BJ: Well when we talk about secondary airports, they are not secondary to the people that live there. Like with the case of Liverpool for example, their closest airport isn’t classed as a secondary one to them.
You have to realize that if you are a smaller company coming into the market, you have to find the waterholes that are elsewhere from the big animals.
There is demand, and there is demand in other places, especially if you utilize the business model that we have, where you can go into the transatlantic market, linking cities together in a different way rather than using wide bodies for flights over the Atlantic.
So that’s really the strength of the business model, and in terms of Icelandair, they are obviously a very good company and have been responsible for the cornerstone of growth in the Icelandic economy for decades.
We don’t really classify them as being our major competitor, to be honest, because we are both operating on the transatlantic market and it doesn’t matter how big PLAY gets or Icelandair or whatever. We will still be really small in that market.
I think there are roughly around 100 million seats that go over the Atlantic every year. So that makes us insignificant in that respect. We are much more just focusing on our own business model and on our own performance.
We also have a shared interest with Icelandair to promote tourism in the region. So I have bigger worries than Icelandair actually.
JF: So you would consider this to be more of a unifying perspective, rather than solely competitive?
BJ: Exactly. If you look at it from their point of view, I mean we are both in Iceland, which means that we both have a relatively high-cost base. We are paying expensive collective agreements with the union, and we can’t compete with the likes of Ryanair or Wizz Air.
But in the situation of Iceland, they would probably rather want to have a competitor like us that is living in the same environment as they are doing, rather than someone that is coming from a completely different reality of economics.
JF: With PLAY expanding into different destinations across the United States, is this going to open up the potential for codesharing arrangements with U.S-based carriers?
BJ: The business model, as you know, resolves around Iceland. So we are a self-connecting ecosystem in that sense. We would be open to discussions with someone but it isn’t really a huge focus or a foundation of our business plan.
If we were offered the opportunity, of course, we would have discussions, both in Europe and also in the U.S as well. We also could offer a lot of connections through Europe, but obviously, our network in Europe is limited also.
So we are always open. We are just opportunistic I guess but it’s not something that we’re actively trying to implement.
JF: Looking towards the decade-end, where do you want to see PLAY?
BJ: Today is not only the anniversary of our first flight but is also the day that we listed ourselves on the stock exchange. With that kind of approach to being a listed company, you have to have a much more disciplined framework around the company.
One of the things that we had to do was explain to investors and the market what our future vision was, and with that is our fleet plan which extends to 2025.
Today, we are operating six aircraft. We already have secured another four so we will be operating 10 from next spring, 12 in 2024, and 15 in 2025.
When we are up to 15 aircraft, in this business model, we don’t really want to extend that to somewhere else.
I think that will be a good time to stop and pause and see what the situation is because we don’t have the ambition of having 50 aircraft or becoming one of the largest airlines in Europe or whatever.
We just want to have the right kind of size for this particular hub and spoke business model around Iceland.
For us, the sweet spot is somewhere between 15 and 18 aircraft because of the seasonality of the business. And so if we go above that, we probably would not go to 20 aircraft.
We would have to go to 30 because we would have to create another connecting hub because it’s only a physical limitation of how many aircraft you can turn around in Iceland in one morning.
So we have a conservative approach to this. Even despite the fact we are growing our turnover 10 times over, we want to remain conservative in this regard. We are led by profits and sensibility.
JF: So it’s more about bolstering what you have already rather than say the rapid growth we saw from Norwegian pre-bankruptcy?
BJ: We are really focused on creating a strong framework and structure for the company, so it can survive all kinds of external factors that we have been seeing such as rising fuel costs, effects of the Ukraine Crisis, and so on.
If you focus on growth only, you are exposing yourself. I mean like what happened to WOW Air, they were relatively underfinanced and were growing too fast, resulting in them simply losing control of the business.
We just want to try to make sure that we keep our eyes on the ball and that we are not distracted by anything else. We just want to execute our business plan.
JF: You obviously know about what Northern Pacific is doing in Anchorage, Alaska, and how it is similar to the models adopted by yourselves and Icelandair. What is your assessment of the carrier in this case?
BJ: Northern Pacific has been very open and complimentary towards Icelandair and our business model as well in terms of creating a hub and spoke business plan.
The only thing I would say is I’m not sure I would be very attracted to starting an airline with Boeing 757s and with the oil prices as they are, it is a cause for concern.
Apart from that, it shows that business models like ours are well-proven and that if you have the right people that understand the dynamics of the revenue management and the network planning around this kind of network, it can lead to many successes.
JF: With that in mind, do you feel that Northern Pacific should have waited and gone for the A321neo as PLAY has done?
BJ: I’m a little bit biased, but we are completely in love with the A321neo and the A320 Family aircraft. It’s a highly efficient, technically reliable, and perfect aircraft for this kind of business.
If the fuel price goes down, then it makes Northern Pacific’s Boeing 757’s more attractive. Even then, they are old aircraft, and so the question of maintenance and the increased costs with that also come into question too.
JF: You have given some positive reviews for the A321neo. Does the airline envisage operating the A321XLR in the future to cover further distances?
BJ: The A321XLR is an aircraft that hasn’t been in commercial service yet, but it looks very interesting on paper and would open up a completely different set of options for us.
We are closely monitoring it, and based on our concentration on the business plan, we may consider it depending on whatever happens after 2025.
If we sit with 15 aircraft in three years’ time and have the luxury of looking at what the next step is, then we have done everything right then. So, with that in mind, I’ll leave that question to that time.
JF: There has obviously been a lot of talk surrounding the travel chaos that has gone on across Europe and the U.S. Do you feel PLAY is fully prepared for the high level of demand that is expected during Summer 2022?
BJ: Luckily, we have not really had any operational issues connected to that.
The worst affected for us in Dublin at the moment, but even then, it hasn’t created massive problems for us. So we haven’t seen anything other than just a lot of demand, you know?
We are seeing that our load factors are growing significantly between months and are acceptable within our limits.
So yeah, we have been very lucky with avoiding the chaos that is going on in an operational sense. The only other issue we have had is one aircraft was supposed to be here on June 1 but has suffered a delivery delay.
But in terms of the daily network, we have been okay so far.
JF: We touched upon the expansion the airline is undergoing in the U.S. How’s the expansion program for the other side of the Atlantic going? So in terms of Europe, is it seeing the same level of success that you’re seeing in the U.S?
BJ: A big majority of our passengers originate from the U.S. This is where the business model comes into play again. A high frequency of flights to the U.S helps to feed into European destinations.
So I would say that we are basically going along as we plant. Iceland as a destination has always been popular. We are seeing that in the Icelandic tourism sector that there is a ramp-up problem. We have issues with getting rental cars, manning hotels, and things like that.
So that does impact the demand a little bit. Even so, we know demand is on the up because of the three destinations that we have launched in recent months.
As we receive more aircraft in the coming years, we will add more destinations on the East Coast of the U.S. So, we are just experiencing a continuance of growth in terms of aircraft, destinations, and passengers.
JF: We touched on competition earlier. We obviously have Nice Air, which would be considered a Low-Cost competitor to PLAY. Do you take the same cooperative approach that you do with Iceland, rather than it being the case of competitive threats?
BJ: The majority of our destinations and network are overlapping. So in that sense, we would be competing. They have one aircraft based in the North of Iceland, and their ambition is to increase the inflow of passengers to that region of the country.
And I have huge respect for that, and I can completely see the business case for it. And that kind of goes towards what I said before about talking about Iceland and doing what we can to help tourism in the country.
It’s great to see that people are creating jobs in aviation, particularly in Iceland. For example, we have provided around 300 jobs in just over a year of operations. I think that’s a beautiful thing.
The one issue that Nice Air has had is with its operations in the UK.
They are kind of stuck between the post-BREXIT scenario of their operator being based in Malta and the fact they don’t have a license to fly between the UK and Iceland. I really hope they manage to solve it because we are rooting for them.
JF: A little off-piste question here. Do you think PLAY would ever venture into the Greenland market, or do you think it’s too small of a market to do so?
BJ: A great question! The Greenland market is another destination that is close to us in the North Atlantic. The growth of interest of tourists in these destinations is brilliant.
Greenland as a country and as a region is becoming more prosperous. I think the tourist industry there will grow a lot in the coming years.
So we have thought about it, and it is something we are looking at. It is not on our immediate plan but we basically want to capitalize on our location.
If we can find a destination close to us and if we can especially link that destination to bigger markets, then that’s beneficial too.
For example, there are no direct flights from Greenland to the U.S. I mean, you will always have to connect somewhere, but I’m sure there are a lot of people in America that would like to go to Greenland.
I think that’s a highly interesting thing. Greenland is in the process of opening up a new airport there, and there’s a lot of investment in infrastructure, so it’s becoming very interesting.
JF: Is there anything else you would like to say to our readers regarding PLAY?
BJ: I’m in a reflective mood today (June 24) basically because we are celebrating our birthday so to speak. I think that everyone here at PLAY is just privileged to partake in the rebirth of aviation.
Post-COVID, I think that we have realized how valuable it is to be able to travel. And it’s just a great feeling to be able to take a small role in restoring that for Europe and the world.
JF: Birgir, thank you very much for taking the time to speak to me.
BJ: You’re welcome James.
Overall…
It remains clear that PLAY has had a successful first year of operations.
The airline has taken its steps very carefully and has definitely learned from others and the respective failures that we have seen pre-COVID.
For PLAY, it is an exciting thing to hear when an airline doesn’t consider the likes of Icelandair and Nice Air as competitive threats.
The fact that the goal is around supporting Iceland and enhancing connectivity could possibly be the start of a new refreshing perspective in this sector.
It is also quite out of the blue, yet realistic, that an airline is quite happy to remain at a certain level of growth rather than expand rapidly. And that is exactly why PLAY is going to succeed going into the future.
