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.
Let’s look at some reasons why it might make sense for American:
- 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
- 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.
- 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.
- [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:
- 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.
- 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.
- 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.
- 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?