Is American’s new flight to Iceland going to be DOA?

In the past few months we’ve seen three different airlines announce nonstop service from DFW to Keflavik (KEF) Airport in Iceland: WOW, Icelandair, and American Airlines.

As often happens with airlines, low cost carriers moving into an airport can attract competitive responses from other airlines even when it may not make sense.  Cue Icelandair and American Airlines announcing service shortly after WOW Air did.  As much as I’m excited about the prospect of flying nonstop to Iceland from my home airport, I have to wonder just how long American will be able to justify the expense of a route like this.

American Airlines 757-200

Let’s look at some reasons why it might make sense for American:

  1. Aircraft utilization: American is flying internationally configured 757s to Iceland.  It’s a long flight that’s absolutely perfect for 757s, since the economics of that jet make sense for longer flights in non-premium markets.  Even though flying for 8.5 hours on a narrowbody jet really sucks, economically it could make sense
  2. Leisure destination: Hypothetically American might be able to charge somewhat of a premium, since Iceland is almost exclusively a leisure destination.  Similar to how they price destinations like Hawaii and New Zealand, this could’ve been their logic, although their introductory pricing on the route may say otherwise.
  3. Competition: The new Iceland routes are major competitive disruptors for American’s long-time fortress hub of DFW.  Not only is it introducing two brand new airlines to the airport but one of them is also a low-cost carrier, marking the first trans-oceanic low-cost carrier to fly from DFW.
  4. [Speculation] Perfect time to start offering basic economy international fares: while the entire Basic Economy concept is a weak attempt at money-grabbing by loser executives afraid of no-name Wall Street analysts, this route would be the perfect opportunity for a loser executive to have the loser and miserly idea to introduce a basic economy international fare.

Now let’s look at some reality:

  1. Seat maps are wide open on American flights: I’m looking at a trip in July (to take advantage of some low fares, more on that below) and there were only a handful of seats selected on the flight.  I checked other dates and it was largely the same.  I don’t think people are booking this flight.
  2. Fares are starting out ridiculously low: if American is solely offering this route because of competition they’re going to be hurting.  WOW Air offered fares as low as $260 roundtrip and very consistently hover around the $400 range.  After you take into consideration the fees you’ll need to pay that ends up at about a $550 roundtrip.  American is offering nonstop roundtrips for $550 pretty much all summer right now.  A leisure-heavy route cannot be sustained for such low fares.
  3. No connecting traffic: there aren’t really a lot of good connecting options to take advantage of for American.  KEF doesn’t have a big Oneworld presence, basically just British Airways flying to London, so American will be depending on O&D (origin and destination, i.e. no connections) passengers for this flight.
  4. No economies of scale: I would’ve loved to see American simultaneously announce other Iceland flights from airports like PHL and CLT, it would give American some economies of scale operationally.  But then again I’m fairly certain this is just a play to match the competition so this wasn’t really an option.

Here’s what I think could happen

When you go to book this flight there’s a warning that the flight is still subject to government approval.  American’s first flight to Iceland isn’t until May but they’ve already sold seats on the route.  I think American may have announced the route and are going through the expense of setting up maintenance, staffing, and catering agreements with contractors but I imagine they’re keeping a close eye on the sales for the route.  If the sales don’t portend well for the airline they have an out: the government approval.  So either bookings will pick up or American could kill the route before it ever gets off the ground (similar to the oft-rumored DFW-AUH flight).

Definitely interesting times ahead for this route, but at the same time I’m writing this with an enormous smile on my face, because it means I’m going to be able to fly nonstop to Iceland from my home airport in 2018!

 

What do you think?  Are you excited about the new Iceland routes?  Are you planning on booking any of them?

6 Comments

  1. Of zero interest to readers who require premium business class seats and to anyone outside of Texas (as more convenient flights already depart elsewhere)

    Happy new year

    Reply
  2. AA can have connections thru KEF to LHR, LCY, MAD, HEL, DME on ONEWORLD carriers and FCO, BCN on Vueling so they do have some connections.

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  3. Rather a very strange route for AA. Best left to Iceland Air, Wizz, Wow, Norwegian, Ryan, Easy Jet, et al. The recent news that 2017 was a record tourist visit year for Iceland (and many Icelanders not happy about that) could be the factor as people are wanting to see uncrowded sites, do the eco-tourist bit. But currently Iceland is maxed out on hotels and KEF can be horrendous at peak hours with lines at immigration/customs out the door. Greed is driving Iceland. Another future Paradise Lost. AA is trying to get some of the action while the gittin’s good.

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  4. This route for WOW is not just for travel to KEF, you need to look at all the connections they have and the prices to European destinations. It will be great for those of us that live in the DFW area and are faced with high priced airfare to Europe. Yes WOW is an LCC but a fare in their all inclusive big seat is cheaper than AA in Y to many European destinations. If you don’t mind the LCC model they will take a lot of business from AA-BA-LH out of DFW to Europe.

    Reply
  5. I briefly stopped in Iceland a few months ago on a route with Wow from SF that got me to Copenhagen. As Steve said in the previous comment, Iceland is getting maxed out and it’s not sustainable. The locals hate it and it’s becoming almost cliche to visit. I wouldn’t be surprised if this route never actually happens.

    Reply
  6. Thanks for the article. I’m trying to decide whether to book for Sept. Since I have some pretty good alternatives, I think I will pass out of caution.

    Reply

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