Quoting kevin (Thread starter): By building appropriate facilities at KEF they could've really revolutionized low cost North America -Europe travel

It's really a moot point. Iceland does not have loads of oil money slushing around which could be used to build up facilities at KEF and invest in bigger fleets with a "build it and they will come" mindset. The lack of these initial funds means that growth has to happen organically. The passengers have to pay for the expansion of the airport and the airlines need to take this step by step.

Of course it is a fun thought experiment to imagine if there had somehow been cash in Iceland in the 1990s or early 2000s to build a massive modern terminal and get FI dozens of brand new widebodies.

WOW has not missed anything, they are that new.

Icelandair has a up and down history. At one time they had a pretty good share of the TATL market and were the first low cost airline connecting Europe with the USA. There were times that management made wrong decisions. Before the current boom, there was a management not running an airline but an investment fund, growing by investing in other airlines and travel related industries, that most went up in smoke in the financial crisis.
Icelandair was than separated out of that mess and since than run as an airline, has been growing since. The boom now is build both on being a hub in the North Atlantic, but also on the booming tourism in Iceland itself.

Quoting hvusslax (Reply 5): Iceland does not have loads of oil money slushing around which could be used to build up facilities at KEF and invest in bigger fleets with a "build it and they will come" mindset

But Iceland has lots of "cheap" energy provided by hydro and geothermal power and you can well compare it to oil. We pull a lot, for such a small population, of value out of the sea in form of fish and other seafood. Iceland could be far richer than it is, but in regular outburst of economic madness separated by about 15 years we are able to let money go up in flames, a big part in this is having our own smallest independent currency in the world.

Also, rather than investing all the money taking in by taxes and charges at KEF into KEF again, the taxes go into government coffers and part of the charges are used to run the smaller airports around Iceland.
But the main impediment to the growth in Keflavík is, that it is difficult to keep ahead of a steady 20%+ growth in passengers each year , that nobody did forecast.

You can't really compare it as the O&D market in DXB is much larger. Iceland as a whole is only 300,000 and only now is the tourist market starting to boom. EK could add more flights at the start as the DXB market supported it, while FI had to add one route at a time, starting with larger markets. Once those flights were starting to fill up and FI had brand recognition in the market, they could add smaller cities and get alot of feed from those markets. Just look at how well FI is doing in BOS and AMS, two markets where they established themselves early,

And I don't really think FI has any regrets, the company was having huge losses in 2009 following the crisis and nobody could've foretold the success it's had since, starting with the SEA route. Now they're raking in huge profits, and a network of almost 50 destinations and a fleet of 30 aircraft is not too shabby for an airline that has a hub with a catchment area of 200,000, in a country of 300,000!  

regards!
Sveinn

There's a pretty significant difference. KEF means adding time to your trip, as you are generally choosing a transit over a nonstop. DXB excels because it is a geographically optimal connection point. It has taken the lion's share of its business from other routes that also required a connection.

Quoting delimit (Reply 8):

There are dozens of possible routes via KEF where there is no non-stop competition.

Adding to my previous post, I would even argue that giving the boom in tourism here FI and WW are actually grabbing their moment right now, whereas previously it wouldn't have worked. WOW are maybe even trying too much too fast with their A330s.

Quoting hvusslax (Reply 9): There are dozens of possible routes via KEF where there is no non-stop competition.

Yes, there are - and those passengers are being served by hubs at LHR, CDG, AMS and FRA that also have bases of O&D travel, high spending business travel, and high volume leisure travel that KEF can't hope to match.

'Big' rates of growth (in FI passengers, in total tourism to Iceland) from a tiny base don't mean much.

Can KEF and FI get bigger? Probably. An Emirates (or SQ) moment? Ridiculous.

Quoting delimit (Reply 8): There's a pretty significant difference. KEF means adding time to your trip, as you are generally choosing a transit over a nonstop. DXB excels because it is a geographically optimal connection point. It has taken the lion's share of its business from other routes that also required a connection.

There's a lot of ways to look at it.

Indeed using Iceland means an extra stop for most TATL routings, but the benefit is that TATL non-stops sell at monopolistic prices especially during peak travel season, and realistically pretty much every time of year except the deep doldrums of off-peak. Maybe all the increased competition and capacity will change that in time, but right now it's still true.

The transit also does enable FI and others to use far less costly narrowbodies and also they have access to lower cost labor.

Given all this, it enables those who don't mind taking the hit of the extra stop a large savings, especially for leisure travelers who aren't in a hurry, especially for families.

KEF is pretty optimal geographically for the TATL routings (a stop in KEF only adds 9% distance to JFK-LHR), and that location is quite nice with the US to the west and EU to the east, but outside of that routing if you look north from KEF you see the Arctic and then Siberia and if you look south you see nothing but water for quite a ways. If you sit in DXB if you look northwest you see Europe, southwest Africa, northeast China, southeast India and all the Southeast Asian nations, all within a narrowbody's range from you, a far more advantaged situation with regard to population and markets.

So I feel EK's advantage is not necessarily being in an optimal geographic location (we've had the argument that says the best purely geographic location would probably be somewhere like Mongolia or Kazakhstan) but it being a combination of a very good geographic location, with stable political situation, great access to finance, a great vision and business plan, and great access to huge but under served or poorly served markets.

Time will tell on FI and WW but to me they can be very successful but don't have the potential to become another EK.

Quoting Revelation (Reply 12): Given all this, it enables those who don't mind taking the hit of the extra stop a large savings, especially for leisure travelers who aren't in a hurry, especially for families.

Sure, I'm not trying to say that there isn't a thriving market for connections through KEF. My point is that DXB is competing, for the most part, against other connections rather than nonstops. KEF was never going to be DXB, but it definitely pioneered the concept.

I think that the strongest niche lies in being able to serve markets in North America where there is no direct service to the major European hubs and serving small European cities at the same time. So for example, if you send an A320NEO/A321LR/B737-8 into Cleveland, then you can have quite a few routes where the customer could take a flight to Iceland and continue on to a small European cities and only stop once, whereas today they would have to stop twice. Imagine for example if Icelandair flew into Cleveland and Basel. Today you would probably connect in New York and Frankfurt to get between those cities. But with Iceland in the middle you could connect once in KEF, an obviously superior connection. And if you have 40 small cities in Europe and perhaps 25 in America, in addition to the current destinations, then the amount of different routes where Iceland is the most efficient connecting hub may be able to fill 150 seats to each of these small cities.

This is, IMO, the Iceland specific niche that you could build a large connecting hub on (Mini EK hub). Btw. I think the Icelandic airlines know this. I mean look at Icelandair going into Edmonton and Anchorage.

Regarding if they've missed their opportunity. I don't think so at all but I think that Icelandair specifically is way too conservative. You don't need oil money to order a bunch of new planes. You don't need oil money. All you need is international financing and some courage. WOW is making Icelandair less conservative and WOW itself is not conservative.

I have high hopes that Iceland will continue to grow fast as a transfer hub.

Quoting mjoelnir (Reply 6): But the main impediment to the growth in Keflavík is, that it is difficult to keep ahead of a steady 20%+ growth in passengers each year , that nobody did forecast.

Yep, that happens time and time again. You see a place like SEA where no one knew five years ago that DL would chose to start a war with AS and now the place is bursting at the seams. You see a place like PIT that was built on a huge scale as a hub for US, and now it's a ghost time because US was a crappy operation that WN took apart top to bottom. It must suck to be an airport director.

Quoting delimit (Reply 13): My point is that DXB is competing, for the most part, against other connections rather than nonstops

Yes, and that's a good point. There is a natural preference for TATL non-stops that FI/WW have to deal with. whereas most routes DXB serves were already not non-stops. But my point is TATL non-stops come at a price premium so they are vulnerable to being undercut.

Quoting delimit (Reply 13): KEF was never going to be DXB, but it definitely pioneered the concept.

I also think KEF won't become DXB but for somewhat different reasons.

Quoting eaa3 (Reply 14): So for example, if you send an A320NEO/A321LR/B737-8 into Cleveland, then you can have quite a few routes where the customer could take a flight to Iceland and continue on to a small European cities and only stop once, whereas today they would have to stop twice.

Yes. It'll be interesting to see if it comes to that with time but right now they don't have the scope to do that. However it is something to shoot for. We see how EK for instance flies multiple A380s to MAN because they can serve the market in a way that BA can't. I could see that happening for someone operating out of KEF.

It'd be interesting to consider to what degree EI could become a low cost TATL hub in a similar fashion. I think they want to be, but I also think that being a part of IAG they will not be allowed to undermine the traditionally high TATL fares.

Quoting eaa3 (Reply 14): I think that Icelandair specifically is way too conservative. You don't need oil money to order a bunch of new planes. You don't need oil money. All you need is international financing and some courage.

Yet I think they are vulnerable to the majors deciding to use a price war to kill them off, or some other LCC competition (like Norwegian or Ryanair TATL or some combination of the above). It would be easy to get way ahead of yourself, IMHO, unless you really accept the fact that it could be a bloodbath and you could be the one providing the blood. So, sure, courage is needed, that seems to be the way some people become incredibly rich, but also how some end up bankrupt too. As mjoelnir said in #6 above there is a history of boom and bust and I'm sure some involved are very leery of going bust.

[Edited 2016-06-04 10:05:38]

One thing that should also be clear. Dubai is what it is because someone decided that they wanted to make it into a proper hub. You see this all the time in the US. An airline decides that this is its hub and that makes it into a high traffic city. Look at Minneapolis or St. Louis before AA. These are relatively small cities that became large hubs because competent businesspeople decided to make it so. It's the same with Dubai and no reason why Iceland should be any acception. IMO, the biggest factor is competence to make it happen.

No they did not have endless pockets from oil and gas or the location to link the booming Asia-Africa/Europe part of the globe.

Quoting eaa3 (Reply 16): One thing that should also be clear. Dubai is what it is because someone decided that they wanted to make it into a proper hub. You see this all the time in the US. An airline decides that this is its hub and that makes it into a high traffic city. Look at Minneapolis or St. Louis before AA. These are relatively small cities that became large hubs because competent businesspeople decided to make it so. It's the same with Dubai and no reason why Iceland should be any acception. IMO, the biggest factor is competence to make it happen.

No, it's not the same in Dubai, given that EK itself and DXB airport is owned by the royal family which has enormous wealth and the power to raise taxes. There are very few entities with access to that kind of wealth and that kind of power.

So I agree competence is a huge factor, however you can have all the competence you want but if you don't have access to the kind of money EK does you aren't going to become another EK.

Dubai's money really isn't from oil/gas itself since they don't actually have much of the stuff themselves, its from its role in trading oil and gas and many other things, as well as financing, etc.

Compared to Dubai in a financial sense, Iceland is "small fish"...

Quoting kevin (Thread starter): I know it's wrong to compare any airlines in Iceland to Emirates, but seeing how successful Icelandair and WOW are in US and Canada it doesn't seem that far fetched. By building appropriate facilities at KEF they could've really revolutionized low cost North America -Europe travel. I would like to stress low cost, knowing that anyone traveling for business would rather pay more and 7-8 hours is not that long of a flight.

I think they have exploited their geographic position in a remarcable way. I dont think they could have attracted more transit traffic via Iceland than they have already done. Most european and american carriers can compete with nonstop services to most attractive points on both sides of the Atlantic. There is no comparison to Emirates position here. I fail to see what opportunities you see Icelandair missed...

Quoting Revelation (Reply 12): KEF is pretty optimal geographically for the TATL routings

Nope. It is too far north to be of any use as a hub. The westbound NAT traffic generally doesn't go anywhere near Iceland unless it's heading to the US west coast and/or the winds are unfavourable. The vast majoirty of the eastbound NAT traffic goes over Newfoundland and peaks at a latitude roughly in line with Ireland. To go via KEF would be a monumental waste of time and fuel as it's nearly a 1000 miles off track.

Quoting Navigator (Reply 19): I think they have exploited their geographic position in a remarcable way. I dont think they could have attracted more transit traffic via Iceland than they have already done. Most european and american carriers can compete with nonstop services to most attractive points on both sides of the Atlantic. There is no comparison to Emirates position here. I fail to see what opportunities you see Icelandair missed...

I'm not trying to say they missed their chance to be Emirates in terms of global coverage.
But if they started exploiting North America - Europe (even Mexico for that matter) market earlier,
I am sure by now they could've had tremendous growth.

From what I hear KEF these days is bursting at its seams: workforce shortage,
overcrowded stands, gates...
Which goes on to show that they never really thought this through. I am sure they
did think about exploiting their geographical position, but infrastructure and their readiness beg to differ.

Quoting RobK (Reply 20):

Tell that to all the pax who are providing FI with a 20% growth rate each year...  

And no, FI is definitely not a 1000 miles out of the way, especially not for Scandinavia and Canada. And how do you figure going via KEF is a waste of fuel? Are you suggesting that FI should start direct flights from mainland Europe to North America??

Quoting kevin (Reply 21):

The workforce and infrastructure problems are due to Isavia and KEF airport itself not being ready, and are in no way the airlines' fault.

Quoting kevin (Reply 21): I'm not trying to say they missed their chance to be Emirates in terms of global coverage. But if they started exploiting North America - Europe (even Mexico for that matter) market earlier, I am sure by now they could've had tremendous growth.

They've been doing this for decades. The market has never grown significantly.

Quoting SRQKEF (Reply 22): Tell that to all the pax who are providing FI with a 20% growth rate each year.

Over how many years? FI is not exactly a new entrant into the transatlantic market.

Quoting delimit (Reply 24):

The last 3 ca. The reason for the growth, as you state correctly, is not that the TATL market is growing but that Iceland is "in" now and a lot of people are trying out the "My Stopover" option FI provide.

Going off my own experience, I feel like Iceland is almost a victim of its own success. I did DEN-KEF-CDG with a 2 day stopover in Reykjavik not long after FI started DEN. It's a beautiful place with great people, food, and culture, and FI is a nice, understated airline. I'd like to go back to Iceland sometime to do the full ring road, but I have very little incentive to try Icelandair again in the near future. I'm amazed at how many more people I know who are going to Iceland, and whenever I've looked to do some DEN-Europe roundtrips this summer, FI's fares are much higher and less competitive than they were in the past. Add to the fact that KEF is a zoo of an airport, and it's hard to justify connecting in KEF vs. connecting in easy access airports like IAD or MUC and getting UA/LH/DL/AF/AA miles that actually mean something unlike FI's loyalty program. Seeing WOW add so much capacity to KEF makes me worried that the Iceland's air and tourism market won't be able to sustain the rapid growth.

Quoting RobK (Reply 20): Nope. It is too far north to be of any use as a hub.

I did the math using figures from gcmap.com and it added 9% distance for JFK-KEF-LHR versus the non-stop. It of course is not adding in winds so you may have a point that it forces you to use less optimal routings than a non-stop. Having the hub in Ireland or Newfoundland could be nice too, but Iceland allows you to use cheaper narrowbodies and not carry as much fuel since it's close to the midway point for so many city pairs.

Quoting Revelation (Reply 27): I did the math using figures from gcmap.com and it added 9% distance for JFK-KEF-LHR versus the non-stop. It of course is not adding in winds so you may have a point that it forces you to use less optimal routings than a non-stop. Having the hub in Ireland or Newfoundland could be nice too, but Iceland allows you to use cheaper narrowbodies and not carry as much fuel since it's close to the midway point for so many city pairs.

It's an extra 322 miles going via KEF, but if we're talking about hubs in general then LHR is not really a good example of a central location in Europe. You'd need somewhere on the mainland and that just makes KEF even less attractive due to the greater distances involved. Sure, if you're flying from northern Europe (UK/Scandinavia, eg.) to northern US or Canada then KEF could make sense, but that's a relatively small market of folks.

For the vast majority of folks, they want to get to their destination as quickly as possible within reasonable costs and unless the cost of doing a stop at KEF is low enough to offset the inconvenience I don't see many bothering and would just hop on one of the many hundreds of carriers flying direct across the NAT. From some of the posts above, Icelandair seem to be MORE expensive that other carriers so there's little point flying with them unless you have business in Iceland.

Quoting RobK (Reply 28): Sure, if you're flying from northern Europe (UK/Scandinavia, eg.) to northern US or Canada then KEF could make sense, but that's a relatively small market of folks.

I picked JFK-LHR because it's a route that BA/AA/et al can sustain some pretty stiff fares on and it's representative of the huge northeast US (BOS/NYC/PHL) to northwest EU (LHR/CDG/AMS) market.

Quoting RobK (Reply 28): For the vast majority of folks, they want to get to their destination as quickly as possible within reasonable costs and unless the cost of doing a stop at KEF is low enough to offset the inconvenience I don't see many bothering and would just hop on one of the many hundreds of carriers flying direct across the NAT. From some of the posts above, Icelandair seem to be MORE expensive that other carriers so there's little point flying with them unless you have business in Iceland.

Absolutely agree. The only way it works is if routing through KEF is cheaper enough to accept the inconvenience. It will never sustain a premium. That's why I suggested above that KEF expansion is vulnerable to a price war should the majors decide they need to protect their TATL premiums.

It is an oddity that fairly doggy dog legs do not necessarily add that much distance to a total trip. Unlike EK they do not unite entire continents with their 1Stops, but they do occupy a niche which serves any number of US/Europe points. Also with their stop overs they can reduce price of overnight stopovers significantly, as well as tour packages to outlast some price wars.

Quoting kevin (Reply 21): From what I hear KEF these days is bursting at its seams: workforce shortage, overcrowded stands, gates... Which goes on to show that they never really thought this through. I am sure they did think about exploiting their geographical position, but infrastructure and their readiness beg to differ.

The growth in KEF is in a big part due to additional airlines, and more and more airlines going from seasonal to whole year.
There will be Easyjet, SAS, BA, Norwegian and Deelta with flights operating over the winter in 2016/2017 and therefore all year round operation to KEF. During season in the summer 21 airlines have flights to KEF.

Icelandair has been adding 2 757 and 2 767 for this summer operation and one more 757 is expected, that is quite some growth for a smallish airline. Icelandair is managing the growth out of cash from the operation, rather than going into debt.

Icelandair and WOW should be going after the secondary US cities with out nonstop Europe service (or less than 1 or 2 cities) for the business pax, and primary US cities for the younger age group that wants affordable air fare to Europe. Cities like CMH, MEM, STL, CLE, SAT, and others would be great for FI and WOWs business models, especially since the likes of BA, AF/KL, and LH don't have the right sized/ranged aircraft for such service.

For the ME3, their advantage is their hubs' location on the Silk Road. They can link Europe to Australasia. They can link the Americas to the Indian subcontinent. If you're in Belgium and need to get to Adelaide, the ME3 can do it for you in one stop. BA is going to make you fly to London, then stop in Bankok, and then go to Sydney and Adelaide. The ME3 will stop you just at their hub and then send you on your merry way.

But for TATL flights, nonstop service is considered an essential but all but the most budget-conscious travelers. Nobody wants to stop in KEF in the middle of the night if they can just go non-stop to the continent.

Please no. It wouldn't help at all shuffling more and more tourists on stopovers round the so called "golden circle". Iceland is a destination for nature lovers and mass tourism will destroy Iceland. Travelers pay premium prices for a relatively unspoiled nature, but they won't do any longer when they run into bus crowds everywhere. What will follow will be the cheapos brought in by WOW and Ryanair, spending their money only at Lidl and Bonus, camping everywhere and finally causing a ban on many freedoms Iceland is popular for. Giving the delicate nature of the Icelandic ecosystem, mass tourism has to be avoided.

Quoting jetfan (Reply 34): What will follow will be the cheapos brought in by WOW and Ryanair, spending their money only at Lidl and Bonus, camping everywhere and finally causing a ban on many freedoms Iceland is popular for.

Mass tourism is hard to stop when a destination becomes popular. Unless you put quotas in place. Otherwise is offer and demand limited by transport (in the case of Iceland aviation and some cruises) and accommodation.

Btw spending their money only at LIDL seems strangely similar to what many Germans do in places like Mallorca. 

Quoting jetfan (Reply 34): Please no. It wouldn't help at all shuffling more and more tourists on stopovers round the so called "golden circle". Iceland is a destination for nature lovers and mass tourism will destroy Iceland. Travelers pay premium prices for a relatively unspoiled nature, but they won't do any longer when they run into bus crowds everywhere. What will follow will be the cheapos brought in by WOW and Ryanair, spending their money only at Lidl and Bonus, camping everywhere and finally causing a ban on many freedoms Iceland is popular for. Giving the delicate nature of the Icelandic ecosystem, mass tourism has to be avoided.

We may already be past a point of no return. Especially with the insane growth in the last couple of years. It is not only a big increase in numbers but also a change of composition of the group that visits Iceland. The stereotypical tourist in Iceland in the 1990s was someone who did his/her research before arriving, they came well prepared and equipped and they had great respect for both the nature of this country and the people living in it. A lot of them were Germans. These days anyone can fly to Iceland on the cheap. WOW keeps expanding and lots of European LCCs are now serving the Icelandic market. Easyjet is bringing in the drunk Brits on stag parties that might otherwise have chosen Prague or Ibiza.

Iceland was not really prepared for this. The infrastructure needs some serious upgrades to deal with the influx of tourists who are increasingly traveling on their own in rental cars rather then organized bus tours. I have started feeling more uneasy when I am out there on the country roads, knowing that they are now filled with foreign drivers with little or no experience of driving outside urban areas. Iceland could do a lot better. Places like the golden circle and other popular spots should be built up to deal with mass tourism and most people should be encouraged to stick with those and leave the more sensitive areas alone. Most of Iceland does not see many tourists and there are a lot of hidden gems for those who still want to put in the effort of getting there.

Quoting Revelation (Reply 27): using figures from gcmap.com

No airline flies a great circle route. They fly a route based on factors like wind and temperature. Look at the NAT tracks for the summer time, they are far south, nowhere near Iceland.

Quoting hvusslax (Reply 36): Iceland was not really prepared for this. The infrastructure needs some serious upgrades to deal with the influx of tourists who are increasingly traveling on their own in rental cars rather then organized bus tours. I have started feeling more uneasy when I am out there on the country roads, knowing that they are now filled with foreign drivers with little or no experience of driving outside urban areas. Iceland could do a lot better. Places like the golden circle and other popular spots should be built up to deal with mass tourism and most people should be encouraged to stick with those and leave the more sensitive areas alone. Most of Iceland does not see many tourists and there are a lot of hidden gems for those who still want to put in the effort of getting there.

That is an interesting observation and I thank you for it. I agree; I've never been to Iceland but I've found that a lot of my gay friends along the East Coast seem to have fallen in love with Iceland. Strange demographic, I guess, but yeah, Iceland is definitely trendy right now.

I'm surprised to hear that young drunk Brits are showing up to party there, though.

Quoting jetfan (Reply 34):

We don't have FR yet...  

But otherwise I agree whole-heartedly with youe statement.