Iceland Express Continues North American Expansion

Iceland Express recently announced two new routes in the US: from Summer 2011, it will operate to Boston and Chicago. The Hub investigates how Iceland Express plans to succeed in North America.

ICELAND EXPRESS MARKET POSITION

Essentially a low-cost-operator, Iceland Express operates in partnership with London Gatwick based Astraeus Airlines, for whom the UK operator carries out nearly all flights for the Icelandic operator. This year it has begun services to North America with frequencies to Newark and Winnipeg, both from Reykjavik, and will begin services to Orlando Sanford in October.

Iceland Express planned service to Orlando Sanford will be operated once-weekly from October 2^nd until October 24^th. With its operation to Winnipeg a success, Iceland Express has been encouraged to add more services to North America for 2011.

From June 2011, it will add a new four-times-weekly service from the Icelandic capital of Reykjavik to Boston, effective June 13^th, and from June 10^th a weekly service to Chicago O'Hare airport.

Iceland Express currently operates a mainly short haul European network with a fleet of B737 and B757 aircraft and, according to IATA BSP data, is the third largest carrier in the Icelandic domestic and international market, a market that is largely dominated by flag-carrier Icelandair.

Source IATA BSP data June 2009-2010

THE ICELANDIC NORTH AMERICAN MARKET

In the twelve months between June 2009 and June 2010, IATA BSP data shows that over 330,000 O+D passengers flew between Iceland and North America, with Icelandair having an 87% share of this market. Icelandair has scheduled flights to Boston and JFK daily, to Seattle five times weekly, Orlando Sanford twice-weekly and Toronto Pearson four times weekly, which is not a year round service.

The North America to Iceland market has shown signs of improving, and IATA BSP data shows that this year was the first time since 2007 that traffic had increased between the two regions. Between June 2008-2009, 294,000 passengers flew between Iceland and North America.

Iceland was affected more than most by the economic meltdown of 2008. Iceland had traditionally been an expensive destination, but since 2008 has been a more affordable destination for inbound leisure passengers. Whilst Orlando Sanford is an outbound market, markets such as Winniepeg and the new destinations of Chicago and Boston will rely on two-way traffic, particularly in markets where there is schedule competition from Icelandair.

The Great Lakes region and Manitoba, served by Winnipeg, are home to the Icelandic diaspora in North America and linking these markets with Reykjavik makes sense. The market is relatively rich, has links with the homeland and, given the strength of the US dollar against the Icelandic Krona, it will be as good a time as any to visit Iceland.

HOW WILL ICELAND EXPRESS SUCCEED IN NORTH AMERICA

Iceland Express will be confident of succeeding in North America. The market is growing and if the carrier can time its flight to connect to Iceland Express network of over twenty destinations, it can replicate the Hub that Icelandair has established with its B757 aircraft. However, it will be offering a low-cost option from Europe to the main US cities, namely Boston, Chicago and New York. By offering offline connections it will avoid the costs associated with a connecting product.

With the extended range of the Iceland Express B737 fleet, they can fly deep into the US or as far as mainland Europe and the lower capacity of the B737 compared to the larger B757 aircraft, with 173 seats on the Iceland Express equipment compared with 236 on the larger B757 operated by Icelandair allows flexibility according to demand.

The question will be whether, what is a small O+D market, will be able to sustain both Iceland Express and Icelandair which has a strong historical product to North America.