WOW Air, the well placed long-haul LCC

By Bjorn Fehrm

August 23, 2016, ©. Leeham Co: WOW Air is the smallest LCC to offer long-haul services over the Atlantic. And it’s the best-placed.

AirAsia X’s CEO explained its early problems with flying long-haul LCC. It was flying too far. Ideal is sectors shorter than seven hours. Fly longer and aircraft/crew utilization suffers. You can only do one turn a day.

With a placement at Reykjavik, Iceland, WOW Air can collect traffic at six hours or less from both sides of the Atlantic. It then connects them over its hub in the middle.

Fgiure 1. WOW Air’s founder, owner and CEO, Skuli Mogensen, in front of a WOW Air Airbus A321. Source: WOW Air.

The lowest fare 

WOW Air’s founder and CEO, Skuli Mogensen, outlines the airline’s philosophy in an interview with Business Insider:

“Our goal is to enable everybody to fly by offering the lowest fares on the market,” says Mogensen. “You shall be up front with customers, to avoid false expectations. Customers know there is no free food, water, IFE or Wi-Fi on our flights. Wi-Fi cost weight and thereby fuel. Therefore, we don’t have it.”

For its ultra-price conscious travelers, dividing the trans-Atlantic hop into two is no problem. Price is paramount. This is where WOW Air operates. The target customer is the air’s backpacker.

When Norwegian Air Shuttle announced it would fly UK to New York for $75 with its incoming Boeing 737 MAX 8, Mogensen announced flights at $69.90. This brought the final Norwegian introduction price to below $70 as well.

Route network and fleet.

WOW Air flies to 33 destinations in Europe and the US, Figure 2. All traffic is routed over the airline’s Reykjavik hub.

With its placement, a large part of its sectors can be flown with standard Airbus A320 series aircraft. It’s all within its 3,000nm range.

Figure 2. WOW Air’s route network with 33 destinations. Source: WOW Air.

Of the 33 destinations, only Miami, San Francisco and Los Angeles are beyond the six hour target from Reykjavik. For these destinations, the airline has three Airbus A330-300s, with the rest being A320s and A321s, Figure 3.

The short flights allow WOW Air to increase its utilization of both aircraft and crew beyond what competitors can do on the trans-Atlantic market.

Figure 2. WOW Air fleet of leased aircraft. Source: WOW Air.

The fleet will expand to 17 aircraft during 2017 and continue to 50 aircraft by 2020, according to Mogensen.

No public data

Mogensen is still the sole owner of the airline. Therefore, there are no public reports for the airline, only traffic information released by the airline.

Around 1.6m passengers traveled with the airline in 2016, up from 1.2m in 2015 and 0.7m the year before. The airline plans to transport 3m passengers during 2017. Mogensen wants to fly 6m passengers by 2020.

26 Comments on “WOW Air, the well placed long-haul LCC

  1. Using Island as a hub is very clever travelers will spend some bucks there to get food and drinks… as a consequences American, United and Delta will sue them for offering low cost long range :=))

  2. I see this as an interesting business model but I fear that such interesting models are often a license to lose money. The price point is very low but at a price of connecting and perhaps connecting again. What is to stop the old flag carriers slowly strangling this attempt in a manner that they did for Laker? Further there are a whole number of other competitors existing and proposed such as Norwegian who won’t stand by while WOW takes their lunch. There are going to be times in the year when this model will haemorrhage money so I hope his pockets are deep and his resolve is strong….

    • I live in Hamburg and there are only two direct flights to North America that I know of, one to Newark with United and one to Toronto with Air Transat. The Toronto flight is only offered seasonally, something like May to September.
      Hence I have usually had to do two legs to fly to Toronto. I have tried Air Transat once and the result was less than ideal, especially for the price. Even my father was not impressed with them when he flew over to visit, and he is not one for the creature comforts.
      What I am trying to get to is that all this big talk of point to point is far from the reality. If I have to fly to Toronto in two legs and Wizz can do it cheaper and without cramming my legs too much, I would be willing to go for it. I am sure there are many people who do not live in London, Paris, Amsterdam, Vienna, Munich, Frankfurt etc. who would be willing to do the same.
      I don’t think the old flags are in the position to strangle any longer. They are busy trying to claw their market share back, and probably that with less revenue.
      I don’t see many other airlines having the geography to pull of what Wizz wants to do. It seems quite synonymous with the big ME3.
      I actually wonder why nobody has done this earlier?

      • WOW and Wizz…easily mixed up. Two low cost carriers at the edge of Europe …on opposite ends. WOW crosses the Atlantic and Wizz bridges Western and Eastern Europe.

        • Oops. I just noticed my mistake as I checked on the site this morning.

          Of course, I was talking about WOW.
          I should actually have known the difference.

      • Icelandair has been exploiting this model for many decades, offering lower fares to/from Europe than the “direct” competitors. Wow just happens to now be undercutting their “legacy” competitor with 321’s that are cheaper to operate than 757’s.

          • And it has been working for Icelandair for decades, they have managed to crush past attempts to copy them. It helps that Icelandair is no less an LCC than WOW either, so I don’t see WOW slowing down anytime soon. Incidentally I went through Keflavik a few months ago for the first time in a couple of years, shocked at how fast they have grown, how is their capital situation? That is the most likely weak point here.

      • According to Wikipedia about the 737-7 range “Boeing plans to improve its range from 3,850 nmi (4,430 mi; 7,130 km) to 3,915 nmi (4,505 mi; 7,251 km) after 2021.” The distance between Hamburg to Toronto is 6222 km. So theoretically it will be feasible to offer such service utilizing the economics of a small plane over the Atlantic to offer reasonable priced tickets and seats more adjusted to “European and North American” sized persons.

        • A hub in the middle beats direct connections due to simple math. You need to fill an aircraft from Hamburg to Toronto. In case there are just 50 passengers a day you may have a problem even with a 737-7. With a hub in the middle you took all the passenges from Hamburg to North America and add in the middle passengers from all other Europe to the trip to Toronto.

          • This is all theoretical at this point. WOW does not serve Hamburg nor do I know if they plan on doing so.

            I must admit that they do try though.

            I just tried to book a flight and the result was an Eurowings flight to Manchester, an Easyjet flight to Reykjavik and then a WOW flight to Toronto, all in 27 hours.
            The return route is a bit quicker. In 12 hours, I could fly from Toronto to Reykjavik with WOW and form there to Hamburg with Icelandair.

          • this is the beauty used by the 3ME … simple but not that stupid

      • WOW Air’s business model has been the daily bread for Icelandair since ages, possibly in the case of Icelandair with more emphasis upon the intermediate stop in Iceland combined with the typical touristical package (Thingvellir, Gulafoss, Geysir, Reykjavik downtown etc over 48 hours), with this here new attempt by WOW to introduce the latest most cost-efficient flight vector to really stretch the prices to lowest feasible bargains.

  3. quote:
    No public data
    Mogensen is still the sole owner of the airline. Therefore, there are no public reports for the airline, only traffic information released by the airline.
    unquote
    This is not corrrect, annual reports for every company in
    Iceland can be obtained at: Directorate of Internal Revenue, Laugavegur 166, 105 Reykjavik, Iceland
    email: fyrirtaekjaskra@rsk.is

  4. I’ve just compared WOW with Norwegian flying direct from London Gatwick to US destinations. Direct flights with Norwegian appear cheaper. As you’d expect really.

    Having said that, both are much cheaper than the established legacy carriers, both British and American.

    • Norwegian cannot offer east /south Europe to LAX or SFO at that price although I recognize that a hub in Iceland is not very convenient as are Hubs for 3ME … Up to now those 3ME are quite successful !!

  5. Actually Ninja there may be an even better location if Stelios, Bjorn, or Skuli are interested. Kangerlussuaq Airport in Greenland. BGSF to UUDD Moscow is under 2500 nmi, just over 5 hours, and BGSF to KLAX is only just over 3000 nmi, and 6.5 hours, San Francisco just under 3000 nmi, and 6 hours ten minutes.

    So both sectors could potentially be flown with A320 or 737 family aircraft whereas WOW uses A330-300 for the Iceland to US West coast sector.

    EDDH Hamburg to Kangerlussuaq is around 1900 nmi and 4 hours flying time 0.83M Toronto CYYZ is around 1700 nmi, and just over 3.5 hours away.

    Vancouver is under 2500 nmi, and 5 hours from BGSF.
    JFK is 1800 nmi, and 3.75 hours.
    London Gatwick is under 1800 nmi, and 3.75 hours from BGSF.

    I wonder where the sweet spot is for PAX vs distance, and price for A320 or 737?

    • And what is the water like and the approaches?

      Looks pretty narrow canyon.

      • Air Greenland, and SAS have flown 757, 767, A330 into, and out of Kangerlussuaq as regular scheduled services. The only problem with BGSF is that at some point it will be decommissioned as the perma frost underneath it is starting to melt. There are various plans for a replacement international runway but probably not as long as 2800 m.

        No idea what the weather profile is, or if they have enough infrastructure / de-ice / snow ploughs etc. The geographic location is interesting though.

  6. having flown WOW air on tickets bought by way of one of the many travel search aggregators, I think they need to do a better job of calling out the completely no frills, and even no necessities, nature of their service.

    when I purchased the ticket, I had no idea that they didn’t even offer water on their flights, and the fees for things such as baggage are far greater than those at similar airlines.

    however, at the end of the day, this is a minor expectation setting issue and overall, the flight was much more pleasant than any flight I have taken on a US Major in the last several years, and now that even they are charging extra for a reserved seat, there is no end user difference between an LCC like WOW and a so called full service airline.

  7. Its the Spirit model only longer flights, 1-3 hours in a cattle car is one thing, 6-8 hours in the same set up is another. There will always be the back pack crowd who will use it but the majors will fight back. They are doing so on domestic routes and it would not be hard to do the same on longer flights.
    Another factor is the TATL market is not that large to accommodate many new entrants, dividing up the pie means smaller load factors and along with lower fares, something has to give.
    The next few years will be interesting, if oil goes up, who will go belly up? The majors have the large hubs and feed along with frequent flyer programs and first class sections. These alone is a pluses for them, it all comes down to will the Spirit crowd grow internationally?

  8. Bjorn,
    You did a follow up on this for subscription only readers.

    I believe it is an interesting exercise but I just wanted to comment on the fact that for many people, Point-to-Point is still not an option, and probably won’t be for quite some time to come. Therefore there is still no option to the hubs for a vast number of people out there.

    • Neither big hubs or point to point. A completely different nodal system is rapidly expanding evolving. Some egghead could easily model this on a computer were it not for the effects of politics, economics ,etc. I believe that this is what boeing is trying to guess at with the NMA.

  9. As a business model it is neither new or optimal (for most part). Origins of LCC.
    On the not new, Laker was a pt to pt player, Peoplexpress (PE) attempted to use the mass of NYC and gauge to create market mass and CASM in a hub to compete against the significant network disadvantage. With no network Laker got beat by inventory controlled price matching (typical tactic by majors) Peoplexpress failed on two counts: 1) one of the comments above, service (inflight, ground and oversells), cramped and late. The gauge was dictated by the illusion that PE could buy at a firesale 747 with 500 seats and win with 4.5 cent CASM. Demand problem of Newark not creating market mass necessary to conquer seasonality and no CASM wins flying BRU-SFO (read not enough markets to support 747 fleet). Is Iceland going to create critical mass both in fleet and market mass ( optimal part)? Not carrying WiFi isn’t the cost that puts airlines out of business. Good geography but mostly likely lack of local market to support critical mass leads to dilutionary pricing to support markets 6-25 (remember the critical mass piece) and one hub is easy to pick apart if major(s) ALLIANCE (can you say anti trust immunity) think your a problem. Not large enough forum for all the issues but Good Luck and remember history holds interesting lessons for all.

    • The 3ME airlines have no local markets to support “critical mass” either they use VLA and survive … so history is not exactly relevant to WOW tentative

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