Viewpoint

Icelandair quietly beats the transatlantic giants

Chris Kjelgaard looks at Icelandair successfully developing its network in the face of competition from airline giants on both sides of the Atlantic.

Much is made of the fact that, with the collaboration of the anti-monopoly regulatory bodies in North America and the European Union, three major joint ventures among groups of very large airlines have been allowed to create almost a stranglehold on commercial flights across the North Atlantic.

Call it collaboration, call it collusion, call it criminal neglect, the antitrust authorities in North America and Europe have allowed these very large joint ventures – each JV containing carriers specific to one of the three major global airline alliances – to control something like 80 per cent, perhaps even more, of all passenger traffic between the two continents.

As a result, fares between North America and Europe are now at record high levels – it’s often much cheaper to fly westbound between the East Coast of North America and Asia than it is to fly from the East Coast to Europe – and the three big JVs have lobbied hard and largely successfully against Norwegian’s efforts to develop a transatlantic network.

Despite their excuses, the simple truth is they are terrified of Norwegian’s successful low-fare model and they don’t want transatlantic fares to come down: they’re making too much money to countenance the thought.

But one transatlantic specialist has resolutely pursued an independent course for many years and without fuss its hub-building strategy has given it a network of gateway destinations in both North America and Europe that is equal to – and perhaps better than – those of any of the major transatlantic JVs.

That carrier is Icelandair. Today Icelandair serves 27 destinations in Europe (including its home base at Reykjavik’s Keflavik International Airport) and 14 in North America. Next May, Iceandair’s gateways in North America will grow to 15, when it begins serving Montréal on a seasonal basis.

Icelandair also used to serve Baltimore Washington International Airport, but dropped the route several years ago in favour of a flight to Washington Dulles International Airport.

In growing its superb transatlantic network, which today offers connections among 42 major European and North American cities on a one-stop basis, Icelandair has had a unique advantage.

This advantage, which Icelandair has exploited to the full, is that it operates from the only existing mid-Atlantic hub. Today, only Keflavik International Airport makes sense as a mid-Atlantic connection point.

Icelandair encourages continued development of its unique hub by continuing to add new gateways at the eastern and western ends of its route network, by interlining wherever possible with domestic carriers at its gateway destinations, and by offering the ability to stop over in Iceland for up to a week for no extra airfare cost.

From this spring Icelandair is leasing two Boeing 767-300ERs to add to its all-Boeing 757 fleet and the carrier has on order nine Boeing 737 MAX 8s and seven 737 MAX 9s.

While Icelandair intends for some of these 737 MAX jets to replace older 757s in its fleet, its move into widebodies indicates the carrier is looking even farther afield in North America and Europe. There are plenty of very large cities on both continents it doesn’t serve yet; and there are plenty more 767s out there Icelandair could yet lease.

That is potentially bad news for the three big transatlantic JVs. But the idea of a mid-Atlantic hub might interest one or two fast-growing, low-cost carriers such as Azul Linhas Aéreas Brasileiras.

Azul recently won the bidding to buy TAP Air Portugal – and Portugal boasts the only other two potentially feasible mid-Atlantic hubs, Lajes in the Azores and Funchal in Madeira.

Transatlantic routes offering one-stop connections via Lajes or Funchal would be much more southerly than those via Keflavik, and the time involved would effectively rule out services to Northern European destinations.

But there are lots of big cities in Southern Europe and round the Mediterranean that could suitably be served on a one-stop basis from North America via the Portuguese islands. If this thought makes the big three JVs sweat, all the better.

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