Robert Silk
Robert Silk
In 2014, one year before the ultra low-cost carrier (ULCC) Wow Air began flying to the U.S., just 152,000 Americans entered Iceland through Reykjavik's Keflavik Airport. But by 2016, fueled by an onslaught of new and cheap flights, that number had nearly tripled, to 415,000, according to the Icelandic Tourist Board


It would be wrong to attribute the enormous tourism boom that Iceland is currently experiencing solely to the emergence of Wow and to the moves that Icelandair and carriers in the U.S. and around the world have made to compete with Wow.

The collapse of the Icelandic krona during the 2008 financial crisis caused the country to turn toward tourism as a way to rescue the economy. Then, the eruption of the volcano Eyjafjallajokull two years later, which interrupted air travel over Europe and the Atlantic for nearly a week, captured the world's attention and awakened many potential travelers to Iceland's rugged beauty.

From 2010 through 2016, the number of tourists visiting Iceland grew from 489,000 to 1.8 million, with the percentage of growth rising in each of those years. In 2016, Iceland saw 39% more tourists than it had one year earlier.

Still, robust as that growth was, the increase in visitors to Iceland from the U.S. has been more dramatic, growing 71% year over year in 2016.

That's where Wow Air and its competitors in the U.S market come in. According to data provided by airline industry analytics company OAG, airlines flew 2,540 frequencies from the U.S. to Iceland in 2014, the year before Wow made its entry into the U.S. market with cheap routes to Boston and Baltimore. This year, airlines will fly 6,116 times between the U.S. and Reykjavik.

I suppose I've always understood intrinsically that the business decisions airlines make have an impact on where we choose to vacation. But until I started reporting on the airline industry two and a half years ago, I didn't understand how pervasive that impact is. A destination can be stunning. It can offer beautiful hotels and a top-rate culture of customer service. But if consumers can't find flexible and affordable air service options from their hometowns, that location is going to lose out.

As much as writing about new routes, shrinking legroom and airline industry political squabbles, my role as an aviation reporter is to help readers see how airlines, as they go after profits and fight for market share, shape the personal decisions we make as consumers.

Iceland is an especially dramatic example of this dynamic.

This year, Wow offered 1,961 flights to 10 U.S. markets. But the carrier's aggressive U.S. expansion, while important in its own right, has also served as a catalyst for competitors, most notably Icelandair.

The legacy Icelandic carrier offered 3,759 U.S. frequencies this year while flying to 13 U.S. markets. Compare that with three years ago, when Icelandair flew fewer than half that many frequencies to just nine U.S. destinations.

Delta, too, has made moves on Iceland, adding Minneapolis-Reykjavik in 2016 to complement its standing New York JFK-Reykjavik route and increasing its total Iceland frequencies from 101 in 2014 to 395 this year.

But it is 2018 that will bring the most interesting developments to date in the U.S.-Iceland market. Next year, airlines are scheduled to make 7,495 trips between the two countries, according to OAG, up 22% from this year.

Wow will serve six new U.S. markets, taking on Delta and Icelandair at JFK while also adding Detroit, St. Louis, Cleveland, Dallas and Cincinnati.

Icelandair won't stand idly by, either. In fact, within days of Wow's separate announcements this summer that it would serve Cleveland and Dallas starting next May, the legacy carrier followed suit. In the case of Cleveland, the dual Reykjavik routes will be the first flights to Europe from that city since United shut down its operations at Hopkins Airport last decade.

To be sure, the fierce competition between Wow and Icelandair isn't just over service between the U.S. and their home country. Each airline uses Reykjavik as a connecting hub for flights onward to Europe, with Icelandair planning to serve 27 European markets in 2018 compared with Wow's 21.

From September 2016 through this past August, passengers flying beyond Reykjavik to the U.S. and mainland Europe accounted for 64% of Icelandair passengers, according to OAG. The effective percentage is likely higher though, since that figure doesn't include passengers who take advantage of Icelandair's free stopover option, which allows travelers to stay in the country for up to seven days.

Likely more than the growing popularity of Iceland itself, it is those connecting models that have caught the attention of United and American, which will launch their first Iceland flights in 2018. In May, United will challenge Icelandair and Wow on Reykjavik service out of its East Coast hub in Newark.

But as unlikely as it seems that the world needs three airlines flying from Newark Liberty Airport to Keflavik, more astounding was American's announcement in November that it would commence Dallas-Iceland service in June. That means that in the space of just two weeks next spring, Dallas will go from having zero service to Iceland to having three carriers on the route.

"Insane. This is a sure money loser," is the way View From the Wing blog author Gary Leff described American's decision to me recently.

Whatever specific calculations American and United undertook in deciding to enter the Iceland market -- and to do so on already crowded routes -- it's clear they're defending their turf against the smaller competitors. Eventually they may push one or both airlines out of Dallas or Newark. Until then, consumers should be ready to enjoy what is a golden time for flying either to Iceland or though the island en route to continental Europe.

Already, the intense competition between Wow and Icelandair has created periodic price wars. This fall, for example, Icelandair offered roundtrips to Reykjavik for as low as $399 from Chicago, Washington, Newark and Boston, all cities in which it goes head to head with Wow.

Similarly inexpensive flights should be in abundance out of Newark and Dallas, among other markets, next summer. In a spot check in early December, for example, Wow was promoting roundtrips between Dallas and numerous continental European cities for less than $300, not counting the numerous ancillary fees that travelers might be subject to. Roundtrip tickets from Newark to Iceland on United were going for a still-modest price of $520.

The cases of Newark, Dallas and Cleveland are especially sharp examples of how competition between airlines, sometimes for reasons that don't seem rational to an outsider, open up tourist markets.

It probably makes sense for an airline to offer a few flights per week between Iceland and Dallas during the summer season, especially when so many of those flyers will be connecting to continental Europe. One can be sure that Wow, Icelandair and American have all conducted that type of analysis. It probably doesn't make sense for three airlines to offer a combined 14 flights per week between those markets.

In February, my masseuse Annie, who likely had never thought about visiting Iceland five years ago, will fly there inexpensively from Miami for a northern lights excursion, courtesy of Wow.

I don't have a masseuse in Dallas. But surely there's someone in Big D, as well, who has heard all the hype about the new "it" destination, Iceland, and who this summer will find herself with an abundance of flight options on convenient days and at inexpensive prices.

She'll buy a ticket and tell her friends about the amazing adventure she's about to embark on. And all the while she won't realize that none of this would have come to pass if an upstart airline called Wow hadn't disrupted the Iceland-U.S. market in 2014 when it started offering affordable, bare-bones flights out of Boston and Baltimore.

Comments


JDS Travel News JDS Viewpoints JDS Africa/MI