Transatlantic Low Cost Carrier Crackup as Wow Air Cancels 5 U.S. Routes

At the beginning of the month I wrote about minor transatlantic player Primera Air shutting down.

They blamed higher than expected maintenance costs, delays in obtaining new aircraft, and an inability to secure bridge financing as the drivers of their bankruptcy. In other words, the airline’s narrative was ‘bad luck and an unwillingness of investors to stick with them until they start earning the profits that they clearly expect.’

That was silly. They weren’t filling their planes despite rock bottom fares. Operating a single frequency between cities like New York and London with higher seat costs and lower fares isn’t a winning model. Airbus A321neos may make sense on short transatlantics between secondary cities that can command higher non-stop fares. Not competing head-to-head with widebodies.

And there is a glut of low cost transatlantic capacity. Iceland-based carrier Wow Air is pulling back, too. At the time I mentioned they were leaving Cincinnati. Then it came out that they were leaving St. Louis. It turns out they’re eliminating five routes.

  • Cincinnati: 4 times weekly service discontinued October 26
  • Cleveland: 3 times weekly service discontinued October 25
  • Dallas/Fort Worth: 3 times weekly service discontinued October 26
  • New York JFK: Daily service discontinued October 26
  • St Louis: 3 times weekly service discontinued January 6


Wow Air, Copyright: zhukovsky / 123RF Stock Photo

New York JFK surprises me, since they’re not trying to compete in the London non-stop market but in several connecting markets, although it’s very competitive. The rest make good sense. Dallas in particular — there’s no way three airlines flying from Dallas Fort-Worth to Reykjavik makes any sense at all.

American entered with daily service, they’ve said they would defend their hubs and they have a bigger customer base and started with daily service compared to the three times weekly Icelandair and Wow each flew.

Cleveland, too, had more than one airline flying to Iceland since both Wow Air and Icelandiar offered four times weekly service.

Last summer I said Wow Air had announced service to every mid-sized city in America. That simply wasn’t sustainable. The only route from that expansion they appear to be keeping is Detroit – Reykjavik, where there is no other player in the market.

Norwegian, the other main transatlantic discounter, has faced rising costs and some argued they lacked the cash to keep going. There has been talk about British Airways parent IAG acquiring them as a way to kill low fare competition.


Copyright william87 / 123RF Stock Photo

There’s likely a business model here, but no one has found it yet. And the challenge isn’t a new one.

Transatlantic low cost carriers date to Freddie Laker’s Skytrain — which after the British government for years tried to stop them, eventually flew and became profitable but expanded too quickly and faced a devaluing pound with interest payments due in dollars and a fleet of DC-10s ground after an American Airlines incident.

What Sir Freddie Laker saw was that major airlines matched his low fares, just as today’s Norwegian and Wow Air drive down fares to the consternation of major established players. But there’s too many of them, fighting for too few passenger, without enough scale to offer competitive schedules. 2017 and 2018 are likely to be high points for low fare transatlantic service, with some ‘rationalizing’ in the market finally happening.

Amidst rising fuel prices Iceland’s government has launched a task force “to create an emergency plan to respond should Wow Air and Icelandair go bankrupt.”

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. It may be the EU’s mandatory compensation for flight delays/cancellations. Any transatlantic route would basically max-out the required compensation, and if fares are dirt-cheap, one late/cancelled flight would wipe out the profits from multiple on-time flights.

    Low cost carriers can’t compete in that environment. Regulations promote quality, not affordability.

  2. To follow on my previous point, here’s a creative idea for Wow and Icelandair: all transatlantic itineraries must include a stopover in Iceland of at least 24 hours. If the price is right, people won’t mind, and low cost travelers might welcome the idea of a “free” stopover. That way, if any leg to Iceland is delayed, the overall arrival date isn’t impacted and no compensation is due. I’m willing to bet that the Iceland Tourism bureau would even throw some money at the airlines for the extra foot-traffic it generates.

  3. It’d seem that Icelandair is in the better position. Sure, they expanded to match Wow but they should also be able to contract easily.

  4. correct me here, but IIRC, instead of doing 1x JFK 1x EWR they’re consolidating and doing 2x EWR, and operated by 330.

    It’s quite insane to fathom the thought that for the longest time, NYC-KEF was just FI and DL out of JFK, but now there are days in which EWR-KEF will either match or exceed JFK-KEF frequencies. (no, there’s no such thing as an “Icelandic diaspora” draw factor)

  5. (to amend my previous post) if my count is accurate, on some days it would be

    United 1x
    Icelandir 1x
    WOW Air 2x

  6. I think that their price structures don’t help them, at least they haven’t with me. I’ve almost bought tickets on these carriers, but when I started to add the extra fees I found that it was nearly the same price as a regular carrier but without any of the frills. Nickel and diming might be all the rage in the boardroom, but it’s kept me with incumbent carriers.

  7. I’m with @Mak… the many times I’ve looked into buying on Wow Air, the numbers just didn’t work by the time I added up everything my wife and I would want to have. Even when they started service to CVG, where I was willing to pay some premium for non-stop service to KEF from an airport that’s a 1 hour drive from my house, it just wasn’t worth it. I could often find connecting fares on the legacy carriers for less – earning miles along with it.

    Often the price of the return leg of the trip on Wow Air would kill the deal for my personal calculations.

    The other hangup for me was the unreliability of Wow Air during IRROPS. Sure I would be on vacation and my job is flexible when it comes to leave. But still, the risk of a very lengthy delay, especially for an expensive country like Iceland, was too much for my taste.

  8. @GaryLeff:
    ” The rest make good sense. Dallas in particular”
    Actually, the least sense. We in Dallas are now back with one airline serving the DFW-LON route AA/BA. They act as a monopolist. That is why per mile costs DFW-LON are so much higher than routes that are of similar length and capacity, e.g. Chicago-London.

    WOW was the best hope of cracking this, albeit with limitations. Now fares will go back up.

    “: — there’s no way three airlines flying from Dallas Fort-Worth to Reykjavik makes any sense at all.”
    WOW did not fly to Reykjavik. That was an optical illusion that served as a transit hub for dozens of cities in Europe. It was vulnerable to the “undercut”, i.e. direct flights DFW-LON, which the AA/BA monopoly did.

    A viable discount carrier strategy would be to fly a thin pipe widebody (e.g. 787-9) from DFW-LGW nonstop, undercutting the $150,000 per person LHR landing fee.

  9. @Mac and @Ryan: That may depend on the hub. A rebundled WOW fare out of DFW to LON was a lot cheaper than a ticket on the AA/BA monopoly.

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