September 6, 2017. WOW Air, the low-cost Icelandic airline, announces yet another expansion in its already crowded route map. Among the new destinations? DFW Airport. It would mark the first-ever nonstop flight from the tiny, beautiful, and eye-wateringly expensive nation to the fourth-largest metro area in the United States. Service would commence the next spring. Iceland had seen exponential growth in visitors during the 2010s, so people were pretty excited about a nonstop from DFW-KEF, for good reason: Iceland is absolutely beautiful.
If you want to see the trip report from my awesome trip to Iceland last year, I’ll link to it here:
Iceland, Part I: Introduction
Iceland, Part II: Snaefellsness Peninsula
Iceland, Part III: Into the Westfjords and Dynjandi
Iceland, Part IV: Djupavik and the most remote swimming pool in the world
Iceland, Part V: Hvítserkur and a lot of driving
Iceland, Part VI: Aldeyjarfoss and some friendly Dutch people
Iceland, Finale: The Touristy Southern Coast
Eight days later, September 14, WOW Air’s rival, Icelandair, announced that they, too, would fly to DFW, starting just six days after WOW Air’s inaugural.
Ok it was getting weird at this point. DFW went from having nothing to having two almost-daily nonstops to Reykjavik. Surely there wasn’t enough demand to keep up with two flights to a tourist destination like Iceland, right?
Well, just two months later, American also announced service from DFW to Reykjavik.
Airline competition out in the open
Customers really don’t get too many obvious glimpses into airline competition, for two reasons: 1) there’s just not that much obvious competition, we more often see when airlines blatantly copy each other (e.g. American and United copying Delta’s revenue-based mileage earning program and Delta somehow not having a problem with it) and 2) most of the actual competition happens in the margins of customer segmentation (“ha! we made more with our full flex refundable 3-day advanced purchase fare requiring a 7-night minimum stay than they did, nerd five!”). Sometimes, though, we get to see it, like Delta flying the inaugural of their shiny new A220 aircraft from LGA to none other than DFW, a route dominated by American.
Boy did we see airline competition with DFW-KEF. American wasn’t going to just sit there while not one but TWO new international airlines with onward connections to Europe moved into American’s home airport. American’s flights to Europe are BIG business. Heck, DFW-London alone generates over $300 million of revenue per year for American!
Let’s face the facts of flying to Iceland for American: they would have to compete with the low prices of WOW and Icelandair. They would also have to pay contract staff at KEF, pay (Icelandair, actually) for lounge access for its frequent flyers, and the service contracts that went along with it. You’re talking about a significant investment of money to launch a new route, and American was willing to do it, on a route they were almost certain to lose money on, just to protect their European market share.
The flights took off into the skies…fares did not
In advance of the first flights launching, people were skeptical that the flights would last very long. The introductory fares did nothing to quell the naysayers, as WOW offered flights for as low as $99 each way. When American kinda matched those prices and offered roundtrips for $398 I absolutely jumped on it and booked a flight of my own last year!
I actually got to go see the WOW Air jet before it left on the inaugural flight between DFW-KEF, took some great pictures too! Icelandair and American left on their inaugurals just a few weeks later. Everything was normal.
Financial calamity for WOW Air
For those of you unaware, flying across the Atlantic Ocean is expensive for airlines (although fuel costs have been low for the majority of the past decade). Low-cost airlines have tried to counter the expense by offering low or no-frill service at lower fares. This can be very profitable, but unfortunately WOW Air grew too quick. Amidst enormous financial losses, WOW announced they were pulling out of numerous US markets, including DFW. DFW was down to two Iceland flights. In November 2018, WOW, not having enough cash to continue operating and after a bond offering didn’t raise nearly enough money, announced that they were merging with Icelandair. Shortly after, though, the merger fell apart and WOW Air stopped operating completely.
Icelandair had to try and match WOW’s explosive growth over the past few years or else risk going under themselves. They expanded into markets that didn’t make financial sense just to protect their market share. Shortly after WOW Air announced they were pulling out of DFW, Icelandair followed suit. Their seasonal flight ended in October 2018 and Icelandair announced it would not return in 2019. DFW was down to one Iceland flight.
American Airlines claims victory
Let’s revisit that hilarious Boris Johnson meme from earlier (which isn’t a political statement by the way, it just illustrates my point so perfectly I had to use it).
WOW and Icelandair crumbled, and American Airlines stood tall in 2019 as the sole provider of nonstop flights between DFW and Iceland. Fares increased but were still low, because they didn’t have profitable business travelers going to Iceland, only vacationers and, mainly, photographers.
…and then the Iceland dream stopped. In August 2019, American announced their seasonal Europe schedule for 2020…and the nonstop flight to Iceland would depart from Philadelphia, not DFW.
After October 25, 2019, there will no longer be a nonstop flight from DFW to Iceland.
Why did American do this? Well, PHL is 1100 miles closer to Reykjavik than DFW, PHL is a low-cost hub for American, and it’s incredibly close to the PA/NJ/NYC megalopolis. So, no doubt that there were lots of compelling reasons for American to change the flight to Philly.
…also, guess who else flies to Iceland from PHL: Icelandair.
(Since the flight is going away soon, the girlfriend and I are heading off to Iceland this weekend for a quick trip before the flight goes away from DFW, which got me thinking about the history of the route and just how interesting it was to actually see the economic impacts of airline competition at my home airport. I hope you enjoyed this brief recap of how in just two years DFW went from having zero nonstops to Iceland to three back to zero!)