The new discount carrier, PLAY, has issued a caution on record oil prices, but is there still time to launch to Orlando yet this summer?
PLAY Airlines, A New Trans-Atlantic Discounter
A new Icelandic airline, PLAY, was set to launch this spring and summer. Like others before it, namely WOW Air, the carrier intends to utilize fuel-efficient Airbus A320NEO and Airbus A321NEO aircraft connecting North America with European destinations. The budget airline takes advantage of Iceland’s strategic location to use smaller aircraft on thinner routes making it easier to achieve the lowest prices across the Atlantic.
The all-coach ultra-low-cost carrier (ULCC) offers flights to Paris, Copenhagen, Dublin, Prague, and London, among its 23 European destinations from four United States gateways: Boston, New York Stewart International Airport, Baltimore/Washington International (BWI), and Orlando.
Like other low-cost airlines, PLAY offers very low prices for the fare itself but makes money from ancillary charges like checked bags, seat assignments, and other add-ons.
Poised to launch service to the US this spring and summer, PLAY will launch in early fall for some destinations and later in the spring, to early summer for others. The carrier has been clear that high fuel costs are a factor in operations.
“As the negative impact of the COVID-19 pandemic recedes the effects of the Russian invasion of Ukraine are a new challenge and the impact on PLAY has so far been limited to the increase of the price of oil. PLAY estimates that based on the current market situation, this war-related price increase will raise its costs by around 10 million USD this year. This cost will be met with an even stronger emphasis on lowering operating costs as well as the introduction of a fuel surcharge, similar to what many of PLAY‘s competitors already have in place.
Currently, PLAY does not have any plans to raise additional funds as its cash position is solid, the company has no interest-bearing debt and the booking flow is strong and growing.
PLAY was in the process of implementing an oil price hedging strategy when the invasion took place causing the price of oil to increase and then fluctuate significantly. As future market developments are very unclear, and markets are reacting to possibly short-term but extreme external factors PLAY will not implement its hedging strategy until the visibility in the market increases. PLAY will however strengthen its efforts to reduce costs across its operation to ensure that the impact of fluctuating oil prices on cash flow and margins will be kept at a minimum.” PLAY
Boston departures are slated for May 11th with one-way prices from $148 days after its inaugural. Orlando is now on sale with flights to the theme park capital of the world starting September 30 rather than spring from $213 through fall and early winter dates. New York Stewart (an hour from New York City) is slated to start June 9th and one-ways can be found for $148 later in June. Baltimore/Washington flights stay mostly on track with an April 20th inaugural to Reykjavik on sale for $190 one-way.
All flights connect in Reykjavik and allow for a free stopover in Iceland en route to their destination for those interested.
Oil Prices Have Dropped, Will Likely Continue to Drop
After reaching a peak of $139.42/bbl shortly following the invasion of Ukraine, oil prices have dropped back to the upper 90s to low 100s ($104.70 WTI/$107.90 Brent – at time of writing.) For most of the prior year, oil hovered around $50-60/bbl, the environment in which PLAY launched initial flights within Europe.
The current drop has “priced in” a prolonged conflict in Ukraine, however, developments with Iran/Venezuela trade deals that could result in lower prices continue to place downward pressure on the price of oil even without the actual importation of that supply. Renewed interest and more profitable wells will also increase supply and decrease the price of the commodity.
As oil prices fall further, will PLAY adjust its timeline to flying to some Gateways? The carrier is prepared to offer service to the US prior to the oil price surge and now that much of the pressure has dropped, travel demand is forecast to be at an all-time high this summer. Should prices drop to the $70s or $80s per barrel, could PLAY try to capture some of that elevated summer travel specifically to Orlando? PLAY’s equipment should also give the carrier an advantage over bigger, less fuel-efficient equipment.
I’m looking forward to PLAY’s US launch and downward pressure plus more options to Europe. I would love to try their product and a stopover in Iceland. With the unprecedented demand in the US and Europe, there’s still time to capture late summer trips now that the oil spike has finished.
What do you think? Will PLAY change course now that oil has dropped some? Is it missing out on a greater opportunity this summer with an October launch for Orlando flights?