WOW air collapse: the gap in Iceland aviation remains

Total airline seat capacity in Iceland this year is set to plummet by more than a quarter versus 2018. This marks a sharp reversal of the strong double digit growth catalysed by the LCC WOW air in the six previous years, when the market leader Icelandair Group and foreign airlines also pursued rapid growth.

WOW air's exit in late Mar-2019 has not only removed the biggest contributor to capacity growth, but has also prompted most of the remaining airlines in Iceland to ease back on the throttle. Excluding WOW air, the collective capacity of Icelandair Group and other airlines will be flat this year.

There is some variation within this. The LCC Wizz Air and the Nordic airlines Norwegian, SAS and Finnair are growing rapidly in Iceland, but Icelandair Group's growth is modest overall and operators such as easyJet and British Airways are cutting capacity.

In other aviation markets the gap left by the collapse of a major player is often fairly rapidly closed by other airlines. This is not yet happening in Iceland - evidence that demand had been artificially inflated by unsustainably low prices during the WOW air years.