Higher Air Fares Anticipated This Winter

Icelandair plane Keflavík

Icelandair CEO Bogi Nils Bogason anticipates that his company’s air fares will be higher this winter than they were last year, RÚV reports.

Inflation figures published by Statistics Iceland seem to bear this hypothesis out: air fares have already gone up 6% between June and July. Research departments at Icelandic banks are actually surprised the increase hasn’t been higher, but also point out that at the moment, it’s 12% cheaper to take flights abroad from Iceland than it was in July 2018.

“As it now stands, there are still 25 airlines flying to and from Iceland, so there is a lot of competition and we have to make a good show for ourselves within that,” remarked Bogi Nils. “Then there are quite a few forces that have an effect on fares. The weather, for example. There’s been fantastic weather in Iceland, so there is less demand for flights abroad. Much less, than there was, for example, during the same time period last year. So there are a lot of things that drive fares and demand and that’s what’s fun about this industry.”

Bogi Nils says, however, that he thinks the competition within the market was unusual last year, hence the projected rise in fares this coming winter.

These fare projections come in the wake of news that Icelandair lost almost ISK 11 billion ($89.6 million/€80.7 million) in the second quarter this year, according to the financial report published by the company on Thursday. Much of its losses are attributed to costs and lost revenue from the grounding of its three Boeing 737 Max 8 planes this spring. The decision to ground these planes was also made by airlines in the UK, Norway, Indonesia, Australia, China, and Singapore following the crash of a Boeing 7373 Max 8 operated by Ethiopian Airlines in which 157 passengers lost their lives and a previous crash five months earlier. Both planes crashed shortly after takeoff.

Bogi Nils says that Icelandair expects to receive some compensation from Boeing for the lost revenue and that negotiations with the plane manufacturer are already underway.

Icelandair Explains Steep Price Hikes Following WOW Closure

Icelandair

Icelandair issued a statement assuring customers that no price changes were going into effect due to WOW air’s closure. Stundin reported, however, that the airline’s ticket prices have risen rapidly: up to 200% on some routes in just a few days. Following WOW air’s announcement yesterday that the company was ceasing operations, the value of Icelandair stocks went up by 13%. At the same time that Icelandair shares were rising, the stocks of most other companies on the Iceland Stock Exchange were losing value.

Increased demand drives price hikes

Higher prices since WOW’s announcement are a consequence of increased demand, says Icelandair, which has caused customers to buy up the lowest fares. “The price of airline tickets is based on demand and in recent days and weeks, there has been a significant demand for our flights, and now as well due to the discounted rates we’re offering WOW passengers. In some cases, there are only first class seats available or else flights are fully booked.”

Icelandair released a discount price schedule for stranded WOW air passengers on Thursday afternoon. Per the announcement on their website, the discount fares are only available to travelers who have already embarked on their journey, and who have a return ticket with WOW air between March 28 and April 11. Fares are based on availability, but are currently listed as $60 to and from Europe; $100 to and from North America, and $160 on Europe-North America or North America-Europe flights (via Keflavík).

Prices could rise in future

Airline competition will not be enough to maintain low flight prices to and from Iceland, according to one specialist. Kristján Sigurjónsson, journalist and editor of Icelandic travel media outlet Túristi, told RÚV it is likely the cost of flights to and from the country will rise in the coming months. “Flight prices have been unusually low and we passengers have been flying at the cost of [airlines] in recent years and that is unlikely to continue,” Kristján stated, adding that while competition between airlines may temporarily keep prices low on certain routes, they will likely rise.