Icelandair KCI departure may have been hastened by 737 Max, analysts say

In the aftermath of Kansas City International Airport losing its only transatlantic flight last month, multiple experts have cited the fallout from the grounding of the Boeing 737 Max as a potential contributing factor.

Icelandair announced at the end of September that it was terminating its nonstop service between Kansas City and Reykjavik, the airport’s only transatlantic flight. The carrier said it was for “commercial reasons.” Icelandair did not respond to two requests from Missouri Business Alert for further comment.

Bob Mann, president of R.W. Mann & Company, Inc., an airline industry analysis and consulting company, said in an email that “commercial reasons” indicates the passenger and cargo revenue on the route did not cover the carrier’s costs, or that the airline has a better use for the equipment required to operate the flight.

According to an announcement from the company, Icelandair was reviewing the flight schedule for summer 2020 “to improve the profitability of the Company’s route network and minimize risk in relation to the suspension of the Boeing 737 MAX aircraft.”

Ascending ridership

According to KCI traffic statistics, 442 passengers took the flight to Reykjavik in May 2018, the month when it was launched. That number increased to 815 this May, a growth of 84%.

The service was seasonal, with four flights per week from May to October 2018 and May to mid-September 2019. The route saw close to 6,800 people last year, and more than 6,500 passengers through August of this year. For each month of 2019, the number of travelers was higher than in the same month of 2018.

Monthly enplanements peaked this June at 2,473, an increase of more than 35% over last June.

“Why I am a little surprised is that by all accounts the community in Kansas City did a great job supporting the flight,” said Seth Miller, an aviation industry analyst at PaxEx.Aero.

Following the launch of the route, KCI saw total transatlantic passenger traffic increase and reach an all-time high. Justin Meyer, deputy director of aviation with the airport, said about 500 people traveled on indirect flights from Kansas City to the other side of the Atlantic Ocean per day before the nonstop flight started. The number of transatlantic travelers grew to about 700 every day this June.

Meyer said Iceland was a connecting gateway to 25 destinations in Europe. A significant portion of passengers flying there were connected beyond Reykjavik.

Rising operating costs

Icelandair used to fly a Boeing 737 Max between Kansas City and Reykjavik, Meyer said. When the aircraft was grounded worldwide by regulators after two fatal crashes, the carrier chose to fly the Boeing 757-200 instead this summer. The plane is larger, less efficient and more expensive to operate.

Meyer said he couldn’t speak for Icelandair, but he suggested the aircraft change would have been detrimental to the airline’s performance on that route.

The change of aircraft “undoubtedly and adversely affected the flight’s economics,” Mann said. When compared with a 737 Max, the direct operating cost of a 757-200 is about 30% higher.

While demand for this transatlantic flight was increasing, Miller said the question was if the airline could “fill a plane with enough people paying enough money to cover the cost.” The market in Kansas City is relatively small, and there are a lot of other one-stop options for people who want to travel to Europe. It is more challenging for Icelandair to make sure passengers will “pay enough,” Miller said.

Additionally, Miller said, the transatlantic market is highly competitive. Icelandair has struggled with rapid expansion and significant competition from WOW Air, a low-cost Icelandic airline that ceased operation in March.

Also, Icelandair’s finances have not been particularly strong in the past couple years, Miller said. He viewed the end of the flight as the carrier trimming a poorly performing route in hopes of securing stability for the company.

Seeking new flights

Meyer said KCI has been working on other transatlantic opportunities with American and European airlines.

“Our top destinations are places like London, Paris, Frankfurt, Amsterdam, etc. Those largest cities in Europe are the ones that we’re looking at and talking to airlines about,” Meyer said.

But Meyer wouldn’t speculate about when the next transatlantic flight will be launched. He said airline recruitment is a very long-term process and the carriers make decisions on when deals close. In the case of Icelandair, the communication between the two sides went on for almost 10 years.

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