Iceland’s appeal as a holiday destination remains fairly specialised with its rugged terrain and dramatic vistas. However, as a location for filming car commercials and music videos (Take That, Sophie Ellis-Bextor, Melanie C) it offers plenty of remarkable opportunities. With a population of just over 300,000 and covering an area of 100,000 square kilometres, Iceland has one of the world’s lowest population densities at around three people per square kilometre. This is comparable to Canada (3.2) and Australia (2.6) and way below the likes of the UK and Germany who score 246 and 232 respectively.
|Take That filmed the video for comeback single Patience in Iceland.|
Keflavik Airport growing strongly
Despite this lack of population, Iceland’s location between Northern Europe and North America provides it with an opportunity to serve part of the transatlantic market. With the cost of imports predictably high, Icelanders are also keen shoppers and regularly visit Western Europe on shopping expeditions. In 2005, nearly 60% of passengers on flights between London Stansted and Iceland were Icelandic and of those only 12% were travelling on business.
Since 1996, traffic at Keflavik Airport, the main international gateway to Iceland has exactly doubled, representing an average growth of 7% per annum. It has achieved this despite a 16% reduction between 2000 and 2002, but since then double-digit growth has been achieved every year.
|A four-year renovation programme was recently completed, which transformed Keflavik’s Leifur Eiriksson Passenger Terminal.|
|Source: Keflavik Airport|
Traffic in the first nine months of 2007 is up a further 8.3%. Seasonality is a major problem for the airport, with passenger numbers in the peak month of July three times higher than that recorded in January and February.
|Source: Keflavik Airport|
UK, US and Denmark are key destinations
According to OAG data for the start of the winter season, the UK, Denmark and the US are the three biggest travel markets each, with just over 20% of scheduled seat capacity. Then come Norway, Sweden and Germany. In 2006, the UK market generated 420,000 passengers with half of that traffic coming from London Heathrow on Icelandair and a quarter travelling with Iceland Express from London Stansted.
Back in May 2000, Go became the first LCC to operate flights to Iceland when it started services from London Stansted. The route was dropped at the end of the 2001 summer season. Iceland Express took up the route in February 2003. Icelandair also serves Glasgow and Manchester in the UK, while British Airways provides flights from London Heathrow.
This winter five US destinations are served by Icelandair; these are Boston, Baltimore/Washington, New York JFK, Minneapolis and Sanford (Orlando).
Domestic market monopoly with Air Iceland
Air Iceland is part of the Icelandair Group and has a monopoly on the Icelandic domestic market. It operates a fleet of two Twin Otters (19 seats), two Dash-8s (37 seats) and six Fokker 50s (with 50 seats). It operates four main routes from Reykjavik Airport (RKV) to Akureyri (AEY), Egilstaddir (EGS), Isafjordur (IFJ) and Vestmannaeyjar (VEY). The total market for domestic air travel in 2005 was just over 400,000 passengers, about the same as it was in 1997.
Icelandair: A shrewd investor
The national airline of Iceland operates an all-Boeing fleet of 757s and 767s in a variety of configurations. It has also ordered four 787 Dreamliners for delivery in 2010 and 2012. In 2006, the airline carried 1.53 million passengers at an average load factor of just under 76%. Its main market segments are passengers travelling from Iceland (28%), passengers travelling to Iceland (36%) and transatlantic passengers travelling via Iceland (36%).
One of the airline’s shrewdest moves was investing in easyJet in October 2004 when the share price was relatively low at 130 pence. It subsequently bought further shares, gaining a 17% stake in the company before selling out in April 2006 when the share price was around 340 pence, netting the airline an estimated £100 million ($200m) profit.
Apart from five US and two Canadian routes (to Halifax and Toronto), Icelandair also serves up to 18 destinations in mainland Europe, depending on the time of year.
Even Iceland has a homegrown LCC!
Iceland Express began operations in February 2003 and spent the first two years operating just two routes – to London Stansted and Copenhagen. Frankfurt Hahn was added in summer 2005 followed by more destinations in 2006. In summer 2007, the airline operated a total of 13 routes from Keflavik, plus Copenhagen services from Akureyri and Egilstadir. Basel, Billund, Eindhoven, Oslo and Paris Orly were new additions for the summer 2007 timetable.
By operating flights to Luxembourg from the end of September to the beginning of November the airline claimed the unlikely distinction of becoming the first LCC to serve the Grand Duchy.
Since it began, the airline has wet-leased all operations to a variety of airlines. Initially, Astraeus were used to operate two 737s, then JetX operated two MD90s and now Swiss-based Hello is operating MD90s on the airline’s behalf.