Let’s travel together.

Play Airlines to slow US expansion as new CEO focuses profits

3


It would be incorrect to describe Iceland’s Play Airlines as a startup anymore. Launched in 2021 during the height of the coronavirus pandemic, the airline is on the cusp of its third summer under the leadership of a new CEO.

Einar Örn Ólafsson, who ascended to the top spot in March after serving as the chairman of Play’s board of directors, has sent a clear message to investors in his first few weeks: He will bring the airline into the black for the first time ever — as long as there is no volcanic eruption or surge in global oil prices to contend with.

Oh, and Ólafsson also happens to be Play’s largest shareholder.

Map watching: The award for ‘sexiest new route’ of the year goes to …

“The past few weeks have been more about getting to know the details of the business … getting into the nitty gritty, getting my hands dirty,” he said during an interview on Monday.

Ólafsson plans no major changes to Play’s core strategy of offering cheap seats — everything else costs extra — between North America and Europe via Reykjavik’s Keflavik Airport (KEF).

“We’re not going to take a U-turn,” he said, adding that where he sees opportunities for changes are only “small things.”

While Ólafsson was mum on what those small things could be, reliable operations and profitability are top of his list. Play, which has not posted an annual profit since its launch, aims to break even this year and post a profit next year, according to an April investor presentation.

Play vs. Icelandair: Comparing Iceland’s newest and oldest airlines

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

That means growth, at least to North America, is off the table in 2024. Instead, Play wants its North American network to mature — in other words, turn regular profits — before it adds more flights. North American destinations the airline serves include Baltimore/Washington International Thurgood Marshall Airport (BWI), Boston Logan International Airport (BOS), John C. Munro Hamilton International Airport (YHM) near Toronto, New York Stewart International Airport (SWF) and Dulles International Airtport (IAD) near Washington, D.C.; the carrier also flies to another 24 destinations in Europe, according to Cirium Diio schedules.

From June through August, the peak summer months, Play will only fly around 3% more seats systemwide than in 2023, the Cirium Diio data shows. That compares to a 67% annual jump during the same period last year.

Icelandair, Play’s main competitor, plans to fly more than 5% additional seats than last year during the same period, according to Cirium Diio. It will add Halifax, Nova Scotia, and Pittsburgh to its map this summer.

Play’s US plans

“There are a few cities still on the Eastern Seaboard, or in eastern Canada, that we would like to fly to,” Ólafsson said. Play will likely add three new destinations in this area between 2025 and 2027, he added.

While Ólafsson offered few details on what Eastern Seaboard or Canadian destinations Play is eyeing, he did say that future expansion in the New York area would likely be to an airport other than SWF. That could mean New York’s John F. Kennedy International Airport (JFK) and Newark Liberty International Airport (EWR) are on Play’s shortlist.

SWF is located nearly 70 miles north of midtown Manhattan, and the trip by bus or car takes well over an hour without traffic.

Other potential destinations within the range of Play’s Airbus A320neo family of planes include Hartford, Connecticut, and Philadelphia in the U.S., and Halifax and Montreal in Canada.

Play plans to double in size, to 20 planes from 10 this summer, in five years, or by 2029. After that, Ólafsson said the airline will look at increasing the number of flights to existing destinations over new dots on its map.

Speaking of planes, all of Play’s A320neos and A321neos have CFM International engines and are not affected by the issues that are grounding hundreds of planes with Pratt & Whitney engines, Ólafsson said.

The outlook for summer transatlantic travel demand looks “stable,” Ólafsson said. Play sees weaker bookings in the U.S. than last year, but that is balanced by stronger bookings in Europe.

“Maybe there’s a sense that Europe is a small continent and it’s all close,” Ólafsson said of the conflicts in Ukraine and Gaza when asked why he thought demand was softer in North America. He added that high interest rates could also be affecting travelers.

More: These are the best times to visit Iceland

Preparing for winter

While eyeing future expansion is a fun exercise, the focus of Ólafsson’s work today is much more imminent: winter. That’s when travel demand across the North Atlantic and to cold, northern climates like Iceland wanes and airlines must shrink to match the market.

“The low of winter is like 60% [the demand] of the summer,” Ólafsson said. “We have to scale up and down quite a bit by the season.”

For North America, that could mean Play cancels flights on days when the least number of people are traveling — Tuesdays and Wednesdays, for example — or suspends certain destinations entirely in January and February to match its schedule to travel demand.

The airline also plans to add flights to markets that are countercyclical, or where demand peaks in the winter. Play will add Madeira Airport (FNC) in sunny Portugal and Ras Al Khaimah International Airport (RAK) in Marrakech, Morocco, to its map in addition to increasing flights to Spain this coming winter.

What Play does this winter will be a test of the budget airline’s mettle. The low season has often been the downfall of startups as they struggle to raise the cash needed to cover expenses during the slow travel months.

But the risk of winter does not worry Ólafsson today, at least, not that he’s willing to say.

“I’m pretty confident we’ll be around our guidance for this year,” he said. “Barring any oil craziness, I’m highly confident that we’ll have significant improvement between ’24 and ’25.”

Related reading:



Source link

Leave A Reply

Your email address will not be published.