As national carriers like Malev and Spanair suffer the effects of increased competition and the global recession, one small airline is doing better than ever, in the place where the financial collapse began…Iceland. Icelandair has defied the odds, with passenger numbers on the rise since the 2008 banking crisis.
As Icelandair’s 757 touches down, passengers who may not have come here five years ago head off to explore the Iceland’s famous landscape. In 2008, Icelandair capitalised on the plunging Króna. I sat down with Icelandair General Manger Hjörvar Sæberg Högnason to find out more.
“In October when we were about to launch a huge marketing campaign in our home country, which was all gonna be based on our branding, on huge changes, and we were introducing new uniforms, we were doing all these things leading up to this and then obviously we had to remove all those plans, kind of overnight. So instead of launching a huge campaign in Iceland, we used this to invest in the foreign markets, because overnight Iceland had become much more affordable. And as a result we saw an increase in our traffic numbers. On average between 30-40% in most of our markets.”
Icelandair was instrumental in getting the government to get involved and realise the opportunities Iceland could take advantage of.
Another potential for financial catastrophe turned into an opportunity with the volcanic ash cloud in 2010.
“We have a crisis team on standby. After all, we do live on a volcanic island. We had like 1800 schedule changes. We had prepared to move over 200 people over to Glasgow to set up a base there and eventually, we managed to keep our flights in the air and we had 85% of our flights unaffected which was unmatched, worldwide.”
Aviation analyst Murdo Morrison credits Icelandair with staying afloat despite both knockbacks, and says some of the airline’s success is down to its unique position.
“It was a pretty disastrous year for Icelandair and they managed to recover pretty well. And the financial crisis does affect Icelandair in the long term because all its costs are paid in dollars: its fuel and its aircraft all paid in dollars. They’re gonna’ struggle to afford the things they have to buy on the world market. “
But Morrison says Icelandair has been very clever in its strategy. “They’ve really focussed on three things. One has been their geographical position, midway between Europe and North America, providing transatlantic services with a stop in Iceland, plus services directly into Iceland as well. They’ve also right-sized the operation. They operate smaller, wide body aircraft so they’re able to fill these reasonably well. They’re not operating aircraft too big for capacity. And the third thing going in their favour is the unique brand of Iceland. Almost like no other country, Iceland has got this mystique and this unusualness and they’re able to play a part in that as the national carrier.”
Icelandair has taken shrewd moves to attract outdoorsy Americans to the island. Högnason says the airline reacted within just one week to capture an opening in the market.
“In the last two years or so we have seen the biggest growth out of the US. We have been opening up single gateways such as Washington and Denver. One of the greatest opportunities we’ve seen the past few years is Seattle. There we were able to enter a fully established market which had been operated by SAS for 45 years. When they pulled out of the market we realised there was a great opportunity for us to enter the market. We’ve got a huge Scandinavian population living in Seattle which we could cater to and there’s a lot of Americans now visiting Iceland. These people tend to have an appeal in the outdoors.”
But they’re about to get a bit of competition from Iceland Express, a new low-cost carrier, though Murdo Morrison thinks there’s enough business to go around.
“Iceland is a good tourist market and there’s a small domestic market so the low cost market will nibble at the edges of Icelandair’s business. What these low cost carriers aren’t doing is the sort of services that Icelandair are offering, the transatlantic services. Their geographical hub is in the idle of the Atlantic. There’s really no other airline that can offer these types of services. If you look at airlines of a comparable size in Europe, the size of Malev, Lot, they’re always going to struggle because the competition is so intense. Their airports are so close together. Icelandair really have this niche and they’ve been quite lucky.”
They’ve also been quite humble, staying out of the headlines, heads down. In fact Icelandair is celebrating its 75th anniversary this year, but no one would ever know it…something Hjörvar Sæberg Högnason mentions just before saying goodbye. Other carriers would be flying banners and balloons; instead, Icelandair is just getting on with it.