PLAY Airlines to Wet-Lease Aircraft Amid Financial Challenges

Iceland’s PLAY to Wet-Lease Out Three Aircraft for Two Years

Icelandic low-cost carrier PLAY has announced a significant strategic move to wet-lease three of its aircraft to an undisclosed European operator until the end of 2027. This decision, disclosed alongside the airline’s 2024 financial results, marks a pivotal shift in PLAY’s operational strategy as it seeks to stabilize its financial performance and align with its long-term projections. The move comes amid a challenging financial landscape, with PLAY reporting a USD 66 million loss for 2024, a substantial increase from the previous year despite revenue growth.

Founded in 2019 and commencing operations in June 2021, PLAY has faced mixed results since its inception. While its flights between Iceland and Southern Europe have been profitable, the yields on transatlantic routes have been disappointing, particularly in 2024 due to increased competition in the North American market. This has prompted the airline to reassess its business model and explore alternative revenue streams, including the wet-lease market. The decision to wet-lease aircraft reflects broader industry trends where airlines are optimizing their fleets to reduce costs and adapt to economic uncertainties.

Background and Financial Context

PLAY’s journey has been marked by both successes and challenges. The airline initially adopted a hub-and-spoke model, connecting passengers from North America to European destinations via Iceland, similar to the now-defunct WOW Air. However, PLAY has focused on operating narrowbody jets, such as the Airbus A320neo and A321neo, to avoid the financial strains associated with twin-aisle aircraft. Despite this, the airline has struggled to achieve consistent profitability, particularly on transatlantic routes.

In 2024, PLAY faced significant financial headwinds, leading to a USD 66 million loss. This was attributed to increased competition in the North American market and the need to adjust its business strategy. As part of its financial restructuring, PLAY has paused its fleet growth for 2024, terminated two Letters of Intent (LOIs) for dry leases of aircraft due in 2025, and is seeking to boost its capital by uplisting from the First North Growth Market to the Nasdaq Main Market in Iceland. These measures are aimed at ensuring the airline’s long-term viability and financial stability.

Einar Örn Ólafsson, CEO of PLAY, emphasized the airline’s commitment to focusing on profitable routes and exploring new opportunities. “While our EBIT remains substandard, we saw a clear improvement in the fourth quarter, signaling that our revised flight schedule is already driving higher revenues and improved financials,” he said. “Looking ahead to 2025, we are optimistic about continued progress.”

“In short, we will focus on the aspects of our business that have proven both successful and profitable—namely, transporting passengers between Southern Europe and Iceland.” – Einar Örn Ólafsson, CEO of PLAY

Operational Shifts and Wet-Lease Strategy

PLAY’s decision to wet-lease three of its aircraft is a strategic move to optimize its fleet and generate additional revenue. The airline’s fleet currently comprises ten Airbus narrowbodies, including six A320-200N, three A321-200N, and one A321-200NX. One A321-200N is already wet-leased to GlobalX, a US-based carrier operating out of Miami International Airport. The new wet-lease agreements, set to begin in spring 2025, will see three additional aircraft leased to an undisclosed European operator until the end of 2027.

This shift towards the wet-lease market is part of PLAY’s broader strategy to focus on profitable routes and reduce its exposure to the volatile transatlantic market. The airline has also applied for an air operator’s certificate (AOC) in Malta, with plans to register six to seven of its aircraft in Malta and maintain three to four in Iceland. This move is expected to provide PLAY with greater operational flexibility and access to new markets.

Birgir Jónsson, CEO of PLAY, highlighted the importance of adaptability in the face of external challenges. “The last few months have shown us that external factors are something that we need to take into account, and we basically need a buffer for those fluctuations,” he said during a quarterly investor call. This underscores the airline’s focus on financial stability and its efforts to navigate the complexities of the aviation industry.

Future Implications and Industry Trends

PLAY’s decision to wet-lease aircraft reflects broader industry trends where airlines are seeking to optimize their fleets and reduce costs in response to economic uncertainties and changing market demands. The wet-lease market, which involves leasing aircraft along with crew, maintenance, and insurance, has become an attractive option for airlines looking to generate additional revenue without the operational burden of managing the aircraft themselves.

For PLAY, this move is expected to provide a stable and positive contribution to its business, particularly as it shifts its focus away from the transatlantic market and towards more profitable routes between Southern Europe and Iceland. The airline’s efforts to obtain a Maltese AOC and uplist on the Nasdaq Main Market in Iceland are also part of a broader trend of airlines seeking more favorable regulatory and financial environments to enhance their operational flexibility and access to capital.

As PLAY continues to adapt to the evolving aviation landscape, its ability to navigate financial challenges and capitalize on new opportunities will be critical to its long-term success. The wet-lease agreements, along with its strategic focus on profitable routes and operational flexibility, position the airline to weather the uncertainties of the industry and emerge stronger in the years to come.

Conclusion

PLAY’s decision to wet-lease three of its aircraft to an undisclosed European operator marks a significant step in the airline’s efforts to stabilize its financial performance and align with its long-term projections. This move, set against the backdrop of a challenging financial landscape, reflects the airline’s commitment to adapting to changing market conditions and exploring new revenue streams. By focusing on profitable routes and optimizing its fleet, PLAY is positioning itself for continued progress and long-term viability.

Looking ahead, the airline’s ability to navigate the complexities of the aviation industry and capitalize on new opportunities will be critical to its success. As PLAY continues to implement its revised business model and explore new projects for its fleet, it remains optimistic about its future trajectory. The wet-lease agreements, along with its strategic focus on operational flexibility and financial stability, underscore the airline’s resilience and determination to thrive in an ever-changing industry.

FAQ

What is a wet-lease agreement?
A wet-lease agreement involves leasing an aircraft along with its crew, maintenance, and insurance. This allows the lessee to operate the aircraft without the operational burden of managing it themselves.

Why is PLAY wet-leasing its aircraft?
PLAY is wet-leasing its aircraft to generate additional revenue and optimize its fleet. This move is part of the airline’s broader strategy to focus on profitable routes and reduce its exposure to the volatile transatlantic market.

What are PLAY’s future plans?
PLAY plans to focus on profitable routes between Southern Europe and Iceland, obtain a Maltese AOC, and uplist on the Nasdaq Main Market in Iceland. These measures are aimed at enhancing the airline’s operational flexibility and financial stability.

Sources: ch-aviation, Simple Flying