In 2011, WOW Air was founded by Iceland’s tech entrepreneur Skuli Mogensen as a low-cost airline with only 3 planes serving 12 destinations. The price of a round trip was a fantastic $99. Today, WOW Air has 17 planes in its fleet now serving 32 destinations. These are still minute compared to other large and long-haul airlines. Their average price today has also slightly climbed to between $300 and $400, including baggage fees. Those prices are still rock bottom in contrast to other large airlines. According to Mogensen, the formula for a small fleet, fewer destinations, and low cost is so simple it defies traditional business airline models. WOW Air simply works. Period. Despite its very young age, WOW Air has managed to break every known business model in the airline and air hauling category. All its planes are plum toned but colorful and sport a very simple logo of the airline, all its fares are ultra-low, and has turned itself into one of the world’s most adored airline in an industry that has earned only hate and scorn from a riding, er, flying public.
Oh, and it put Iceland on almost every American’s bucket list destination for a vacations. Gander on this: WOW Air has grown financially by 125% annually since 2011. By the end of 2016 it is estimated to earn $290 million in revenue and probably half a billion dollars by 2017. In short, since its founding, it has been very profitable. And it has done so without any subsidies from the Icelandic government or any other private investor. It all has to do with being highly efficient. Again, according to Mogensen, you have to think in terms of being a logistics business. Much as freight and hauling companies like FedEx’s planes transports goods like equipment or clothes from point A to point B, so passengers also need to be transported from point 1 to point 2. It’s the same concept and the same inspiration. WOW Air honestly admits that it can keep costs down by focusing on simply the basics and trimming out the rest. For instance, even for a small airline, it buys its planes new because they are more fuel efficient rather than buying used old planes.
Video Courtesy of YouTube:
Another strategy is trying to fill every flight without the arbitrary cost relative to when the ticket was bought. Thus, a ticket bought two months before, say, November 1, will still cost the same when purchased a day before November 1. Relative arbitrary costs of tickets based on when it is sold have given airlines a notorious reputation. But not with WOW Air, and this is proven by the fact that 90% of all its flights are fully booked. Of course, no wanted to go to Iceland 50 years ago, 10 years ago, or even 5 years ago. But when Iceland’s Eyjafjallajökull Volcano erupted in 2010, Mogensen had a “cartoon light bulb over the head” moment, and launched WOW the following year. Iceland’s government also saw the opening by launching a PR campaign to see the country’s far out fjords, icescapes, flora and fauna, unique culture, dancing, and outdoor bathing. So how did Mogensen succeed in such a short time? By thinking small: an efficient small fleet, fewer destinations, and lower costs.