When Icelandic upstart Play Airlines abruptly shut down operations last week, canceling all flights, the news felt almost anticlimactic. The Reykjavík-based carrier, which launched in 2021 with a kicky red logo and high hopes, had already wound down transatlantic service to the U.S. East Coast due to a decline in revenues. Service at the remaining U.S. gateway, Baltimore/Washington Airport, was set to end on October 24.
Play’s shutdown comes as some U.S.-based low-cost carriers have hit a turbulent stretch. Most notably is Spirit, which in August entered its second bankruptcy in less than a year. Lesser-known LLCs have also struggled, including Silver Airways, a regional line that operated flights from Florida to the Caribbean; it pulled the plug in June.
The topic has stirred some conversation in the industry. United Airlines chief executive Scott Kirby recently made remarks at an airline conference that the airline budget model is doomed, describing the sector to several news outlets as a “sinking ship.”
But does Play’s recent shutdown offer another example that the budget airline business model—with its formula of offering cheap fares and a no-frills experience—may also be in jeopardy?
Craig Jenks, president of Airline/Aircraft Projects, a New York consultancy, cautioned against reading too much into Play’s demise.
“The problems faced by Play and its predecessors are mostly unique to Iceland,” he said, noting the conditions of its geography as a small island country with a population of 400,000 and a limited domestic market.
Play had positioned itself as the successor to Wow, another shuttered Icelandic carrier, vowing to avoid the mistakes of its predecessor. The airline had a robust network servicing Western Europe, in addition to its transatlantic routes, and shared a bullish outlook earlier in the year. But that wasn’t enough to keep Play afloat. After all, with this kind of model, carriers can only succeed with strong traffic on connecting flights.
“Wow and Play believed they could compete with Icelandair in the connecting market between North America and Europe,” Jenks said. “Wow tried doing it with un-viably low fares, Play tried by serving niche airports,” such as Stewart Newburgh, about 70 miles north of New York City. Ultimately, Icelandair, the country’s longtime flagship airline, was the only one that prevailed.
Surviving a volatile market
One major challenge budget carriers face is that their low-fare advantage has been significantly eroded by the availability of basic economy fares offered by legacy airlines like Delta and United.
Internationally, the outlook is also mixed. While some established budget carriers like Ryanair and easyJet are still going strong, Play offers a cautionary tale. Like other now-defunct budget airlines, it was initially embraced by price-conscious travelers to Europe.
Other examples include Primera, a Scandinavia-based carrier that went bust a few years ago, and Norwegian Air Shuttle, which did well for a time until it stopped all transatlantic routes in 2021. Another European budget airline, Norse Atlantic, subsequently swooped in to pick up the pieces.
“The low cost carriers are doing fine in Europe,” Jenks said. “They don’t face the generic problems [their counterparts] have been facing in the U.S.,” such as stiff competition from major carriers.
It’s also worth remembering that the demise of the budget airline sector has been declared before. After the industry was deregulated in 1978, a wave of scrappy, low-cost carriers took on legacy airlines, and with far lower costs than their much larger rivals, managed to stay competitive. But only for a while: Within a few years, most had vanished—they simply didn’t have the capital to withstand the boom-and-bust cycles that afflict the industry seemingly every decade.
However, those notoriously volatile market conditions haven’t discouraged some entrepreneurs. JetBlue founder David Neeleman, for one, founded Breeze Airways more than four years ago, and the Utah–based carrier just launched its first international flights.
Meanwhile, Frontier is among the budget carriers that have responded to higher postpandemic passenger demand for more premium offerings by rolling out premium class seats, which are wider and more comfortable than its normal seats.
“Tastes have changed in this country,” said Frontier chief Barry Biffle at a recent industry gathering.
In other words, the low-cost carriers that survive may end up looking a lot more like their higher-cost brethren.
