After Icelandair Leaves Kansas City, Can MCI Land Another Nonstop Flight to Europe?

Oct. 7, 2019

When Kansas City International Airport won its first transatlantic flight in 2018, then-Mayor Sly James said it marked “the next chapter in Kansas City’s development.”

But that two-year chapter came to a close last week when Icelandair announced it would end its seasonal service to Keflavik airport near Iceland’s capital city of Reykjavik. That route, which airport leaders worked for a decade to recruit, was Kansas City’s only transatlantic flight.

Disappointed, but not deterred, airport officials remain committed to cultivating another nonstop route to Europe.

If nothing else, Kansas City now can point to recent experience — and passenger traffic data — with transatlantic travel. Some believe the new $1.5 billion terminal under construction will help KCI snag more route expansions. And experts say airlines looking to add transatlantic travel are likely already eyeing Kansas City, one of the cities with the most demand for European flights that doesn’t have nonstop service.

Even so, any addition of a European flight is unlikely to materialize without some sort of a subsidy or guarantee — as was the case with the Icelandic flight.

Before landing Icelandair, airport leaders believed a transatlantic route would create demand in and of itself. And two seasons of flying over the Atlantic show merit to that thesis: After introducing the nonstop, Icelandair’s hub airport became a top 10 destination for Kansas City travelers. And peak daily demand for European travel nearly doubled between the summers of 2017 and 2018, according to airport data.

“The market did in fact respond positively to Icelandair’s arrival,” said Justin Meyer, the airport’s deputy director of aviation who oversees marketing and airline recruitment efforts. “The worst thing for us would have been if Icelandiar showed up and the market didn’t change. But we saw significant growth in the demand for transatlantic service.”

But it’s unclear if the demand was strong enough to win over another carrier.

In 2018, the carrier flew a total of 6,792 passengers from KCI. That’s less than half of Air Canada’s 2018 departure traffic of 16,457 people. Market leader Southwest flew nearly 3 million passengers and Delta topped 1 million passengers from KCI last year.

By July of this year, Icelandair had flown 5, 137 total passengers — representing one-tenth of 1% of the airport’s year-to-date market share.

Meyer said earning new flights requires long-term relationship building with airlines, whether it’s for budget flights to Florida or a new route to London or Paris.

“Those efforts haven’t stopped,” he said. “To that point, the experience with Icelandair will better help position Kansas City for the next opportunity.”

Incentives for new flights

When it comes to luring new international flights, airport officials say they’re watching local demand. In addition to Caribbean vacation destinations, they’ve seen rising demand for European travel: In June of this year, nearly 800 passengers per day used KCI to fly to and from Europe — some on Icelandair, but many more on other airlines that required connections.

“I’m not trying to get a nonstop flight to Sao Paulo, Brazil because the data doesn’t say that would be successful,” Meyers said.

So which European cities might be successful?

Current demand is strongest for flights to Paris, London and Dublin.

Meyers noted that Delta, British Airways, Aer Lingus of Ireland, Condor of Germany and KLM of the Netherlands have recently added European flights to mid-sized U.S. markets that are not big airline hubs. He believes a flight to a major European hub like Paris, London or Amsterdam would prove most successful.

But any new flight to Europe will likely require some sort of airline incentive.

In 2017, the Indiana Economic Development Corporation offered Delta up to $5.5 million to launch a nonstop flight from Indianapolis to Paris. Last year, the governor there proposed spending an additional $20 million to lure more international flights.

Last year, Pennsylvania’s economic development agency committed $3 million to British Airways to launch a flight from Pittsburgh to London’s Heathrow Airport after a 20-year hiatus in service.

Meyers said some sort of inducement would likely be necessary to get a new KCI flight started. The incentives are most needed early on as a route ramps up to maturity, he said.

“I think there’s a long-term profitable opportunity for transatlantic service from Kansas City,” he said. “That’s the goal.”

For Kansas City’s flight to Iceland, the airport waived about $172,000 in airline fees and provided about $250,000 for cooperative marketing efforts with the airline.

Additionally, the Kansas City Area Development Council and the Greater Kansas City Chamber of Commerce put up an undisclosed amount of cash to pay Icelandair if the airline lost money on the route.

Tim Cowden, president and CEO of the development council, said the organization would honor its commitment to Icelandair, which only backed the first two years of the flight.

“We were proud to have stepped up and helped make this happen — but for this commitment the flight wouldn’t have occurred,” Cowden said.

In 2018, KCI spent about $11.5 million on a new international arrivals area in Terminal C. Airport officials believe that work was still worthwhile because the terminal previously had only one gate that could handle international arrivals. That setup required planes to be towed to other gates after passengers were unloaded to go load passengers at other gates, leaving some to sit on planes for upwards of an hour.

KCI has international routes to Toronto, Canada; Cancun, Mexico; and Punta Cana, Dominican Republic. Last week, charter company Vacation Express announced it would add a new nonstop flight to Puerto Vallarta on Mexico’s Pacific Coast.

In 2018, Icelandair’s Kansas City flights averaged a 66% occupancy rate, according to transportation department data provided by the airport. But peak demand reached nearly 82% in May of last year. KCI officials say those rates are similar to other first-year transatlantic flights from other mid-sized markets like Indianapolis.

Cowden said the local flight was just “catching on,” and its passenger counts should help with future recruitment efforts.

“I have to believe that other carriers will take note of this,” he said.

Icelandair’s unique challenges

Icelandair is not a typical airline.

It leveraged its unique geography to offer cheap one-way fares between the United States and Europe. It also offers free stopovers in Iceland for travelers who want to glimpse the Northern Lights, hike a glacier or take a dip in the country’s abundant hot springs.

But it’s a smaller airline.

And the recent grounding of the Boeing 737 Max disproportionately affected the company, experts said. Aviation regulators around the globe halted Max flights after hundreds died in two separate crashes.

Icelandair’s two-sentence announcement about leaving Kansas City cited that grounding as a factor. That forced the airline to lease some aircraft for the 2019 summer season and move KCI flights to heavier, bigger and more expensive planes, airport officials said.

“There’s no question that having fewer aircraft raises the bar in terms of how well a market has to do to make the cut,” said airline analyst Seth Kaplan. “So I have no doubt that makes it harder. They would have been a bigger airline if they had the Max.”

Kaplan doesn’t think the airline’s departure from Kansas City will necessarily scare off other airlines. Kansas City, St. Louis and Cleveland are the three American cities with the most demand for European flights that don’t offer nonstop service. So Kaplan says airlines looking to expand will at the least consider markets like Kansas City.

“People recognize that Icelandair has its own specific issues. I don’t know that this would make any other airline more or less likely to start service there,” he said. “I’m sure it’s on the list.”

Beyond the aircraft challenge, Icelandair only cited “commercial reasons” for leaving the market.

Airline spokesman Michael Raucheisen said the airline’s decision to cancel local service “was not an easy one and it does not mean we will never return.”

The company’s entrance to the market was met with support and big expectations, he said.

“Many of those expectations were met and even exceeded, especially during the summer months,” Raucheisen told The Star. “However, due to many unforeseen circumstances we have had to reevaluate and adjust our schedule moving into 2020. ... We would like to thank everyone in Kansas City for the opportunity to serve your wonderful community and we hope we are able to return someday.”

Brett Snyder, an airline observer who authors the Cranky Flier blog, said the airline’s departure is not a huge surprise.

Kansas City is a longer — thus more expensive to fly — flight than many of Icelandair’s U.S. destinations.

“It seemed like a stretch,” Snyder said. “And Kansas City had no other long-haul international flying at all, which made this definitely more of an experiment.”

Icelandair rapidly expanded into underserved U.S. markets. But a price war with Icelandic competitor WOW Air drove ticket prices down. WOW went bankrupt earlier this year, though new owners have announced plans to relaunch service soon.

With its rival out of the way, the market has become more “rational,” Snyder said.

“And Icelandair is probably rethinking it’s risky markets like Kansas City,” he said.

In addition to the KCI flight, Icelandair also announced it would end service to San Francisco. In March, it dropped its route to Cleveland, which months before had service on both Icelandair and WOW.

Officials with the Cleveland Hopkins International Airport declined to comment for this story.

Does new terminal mean new flights?

The allure of more nonstop flights was frequently discussed in the campaign to win approval for the new single terminal currently under construction.

Business executives in 2014 said a new terminal could help recruit more domestic and international nonstop destinations. For their part, airlines have not committed to adding flights to KCI because of the new terminal, but airline leaders did acknowledge that the current multi-terminal setup limits growth.

Joe Curtis, senior vice president of corporate travel at Ascendas Travel, said the new terminal may push airlines to expand their domestic and international routes through Kansas City. He said the Icelandair experience was a good chance to test the market.

“It’s disappointing to see it end,” he said, “but I do think there will be other opportunities in the future with the new airport.”

Ascendas handles travel arrangements for companies across the United States, including many of Kansas City’s largest employers. Curtis said most business travelers prefer big airlines like Delta and United so they can rack up points, earn upgrades and enjoy amenities like lie-flat beds on long flights — an option that Icelandair did not offer.

A nonstop flight to Europe would be a boon for local business travelers, he said. But any airline offering the market’s sole transatlantic flight could charge a premium for it. That could be challenging as many business travel policies enforce price controls, he said.

“If you just have one nonstop plane to London, it’s going to be a very high priced flight as opposed to going there through New York into London,” Curtis said.

Ascendas frequently books Kansas City travelers on flights to Frankfurt, London, Shanghai and other faraway destinations. But Curtis said most business travelers here are more interested in expanding domestic nonstop flights.

If Kansas City were to land a nonstop flight to London or Paris, that would be an undeniable convenience for fliers traveling to those destinations. But for those connecting to other European cities, the flight just moves an inevitable layover to another continent rather than Chicago, Charlotte or New York.

“Sometimes you may be better off flying nonstop from a U.S. hub to that destination rather than connecting, especially given time changes and strain on our body clocks,” said Henry Harteveldt, a travel industry analyst and owner of Atmosphere Research Group.

He doesn’t think Kansas City will recruit another transatlantic flight anytime soon. Our proximity to major hubs like Minneapolis, Chicago and Dallas makes for relatively easy connections.

“The airline business has a fundamental truth: Airplanes are expensive and have to be paid for,” Harteveldt said. “The Kansas City metropolitan area is too small and lacks a critical mass of major employers that may have international bases of operations outside North America.”

Still, airlines have shown interest in entering new U.S. markets — and smaller, efficient planes with longer ranges may make some routes profitable in the coming years. He said Kansas City can improve its chances by mirroring the success of cities like Nashville and Austin in attracting sizable businesses with international operations.

Harteveldt said nonstop service across the Atlantic is a point of civic pride for many American cities.

“I understand why cities value this,” he said. “But, like the song goes, you can’t always get what you want. Flying isn’t just about volume, it’s about the revenues and profits that can be earned.”


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