Play Revamps an Old Model
This upstart ULCC from Iceland does not want to repeat Wow Air's mistakes.
A note to start today. The U.S. aviation industry is understandably aghast at Friday’s incident with an Alaska Airlines Boeing 737-9, when a plugged exit door separated from the airplane while it was at 16,000 feet, resulting in a rapid decompression. While this newsletter focuses on commercial matters, I will be interested to see how this incident — and the resulting groundings — affects consumer behavior. For more on the technical issues, I recommend you subscribe to Jon Ostrower’s excellent publication, The Airline Current, if you do not already.
Another news item broke late Monday that I do cover more carefully. JetBlue CEO Robin Hayes announced he will retire next month, citing health issues. Journalists’ ears tend to perk up when we hear this — spending time with one’s family or taking time off on the advice of doctors is often cited as a reason for an executive’s retirement, particularly one who leads a middling company. I’m no doctor, but I think anyone who has seen Hayes in recent years knows he doesn’t appear as spry as when he took over nine years ago. As he said in the release: “the extraordinary challenges and pressure of this job have taken their toll.”
I have been critical of JetBlue management for lack of vision and that includes the airline’s president, Joanna Geraghty, who becomes permanent CEO on Feb. 12. But I have always enjoyed my interactions with Geraghty, and I found her to be an engaging and sharp answerer of questions. If Geraghty breaks free of the current strategy operating an undersized airline in only three markets1 while relying on a brand that was fresh 20 years ago, she might get JetBlue’s mojo back. I’d also like to hear her stop blaming air traffic control — an issue all airlines must deal with — for the airline’s operational woes on the East Coast. I wish her well, and I expect I’ll have more to say about JetBlue’s future either when we learn the fate of its proposed merger with Spirit, or when the airline reports fourth quarter earnings.
Now for today’s post on Play airlines.
Like me, you may be tempted to label Play airlines as a redux of Wow Air, the upstart from Iceland founded in 2012 by Skúli Mogensen, a wealthy entrepreneur and investor who thought he could reinvent the airline industry with ideas like in-flight auctions for better seats conducted through mobile phones.2 Because of shoddy management — and too much growth, too fast — Wow went bust in 2019 (before the pandemic!).
I figured the ramifications were obvious: Iceland would revert to being a country with only one home-based airline. Yes, Iceland has advantageous geography and strong inbound tourism, but it's also a nation of roughly 375,000 people. And with more narrowbody aircraft now capable of profitably flying nonstop between the United States and Europe, and U.S. and European airlines becoming better at winning both the premium and cost-conscious parts of the consumer market, how many sixth freedom travelers need to stop in Iceland to save money?
But that's not what happened. Later in 2019, a group of investors (some of whom had ties to Wow) started working on what would become Play.3 They still saw potential in harnessing the best parts of Wow (such as how the airline stimulated transatlantic demand and inbound tourism), while dispatching with the worst (including the foray into A330s and a short-lived route from Iceland to New Delhi). Even when Covid hit, the investor group kept planning, and in July 2021, Play launched its first flight from Keflavík to London Stansted. Today, the ultra-low-cost carrier flies six A320neos and four A321neos to more than three dozen cities in Europe and five in North America.
To be sure, many differences exist between Play's model and Wow's, and because this is a niche newsletter, I'll cover some below. But after I spent an hour speaking with Birgir Jonsson, Play’s CEO and Wow's former deputy CEO, for 14 months in 2014 and 2015, I sensed the key difference is not the strategy or the network or the fleet, but the guiding philosophy from leadership. Play, which had an ipo in July 2021, operates under the best practices for corporate governance among public companies. And Wow, which for a long time was wholly owned by Mogensen (who once told a conference audience he funded the carrier from "[his] personal left pocket”), had a different way of doing business.4 Mogensen seemed to want to revolutionize the airline business; Jonsson told me he's happy to copy Ryanair because he thinks they're the best airline in the world.
"I am not a dictator here," Jonsson said last week. "I have a very strong and professional board with me. I have a very strong management team. We are very focused on how we make network decisions and financial decisions. It's not based on emotions or all kinds of feelings. And when Wow made those kinds of mistakes, they just wanted to become big. Maybe it was vanity or ego, but they made the wrong decisions and paid the price. That's the brutal truth of our business — if you make a mistake, you're dead."
Let's take a closer look at Play's strategy and examine how it plans to avoid repeating Wow's mistakes.