As Southwest Airlines LUV attempts to draw in more passengers and break out of a string of unprofitable quarters, the budget airline based in Dallas recently announced it would partner with Icelandair, which is based in Reykjavik.
Codeshare partnerships like that of Delta (DAL) and Air France-KLM (AFRAF) are rare for low-cost airlines but benefit both airlines as they allow passengers to book flights to a wider network of destinations and bring in revenue on routes they don’t usually serve.
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The Southwest/Icelandair partnership is exciting, but there are lots of unknowns
“The initial North American gateway between Southwest Airlines and Icelandair will be Baltimore (BWI), with other destinations to follow,” Icelandair said when the partnership was first announced in September 2024. “From these gateways, Icelandair customers will have the opportunity to connect to numerous Southwest destinations.”
In an interview with aviation website Simple Flying, Icelandair Director for North America Grimur Gislason said the company is considering cities such as Denver and Nashville for the aforementioned additional hubs. Icelandair already runs flights from Reykjavik to both cities but intends to turn them into transition airports for going on toward smaller cities through the Southwest partnership.
“They need to see how it works and how it goes but they’re very excited about [it],” Gislason told Simple Flying. “They want to expand on their partnership. It goes without saying they want to put more codes on our flights and vice versa.”
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Estimates show that when the total visitor numbers for 2024 are calculated early next year, Iceland will have seen more than 2.4 million international tourists, with the U.S. taking up a significant portion of that market.
Given its existing partnerships with Alaska Airlines (ALK) and JetBlue Airways (JBLU) , Icelandair has been eying an airline that could connect to the southwestern part of the United States.
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Final piece of the puzzle now in place
“We have pretty much covered the West Coast with the Alaska Airlines partnership, and East Coast is JetBlue,” Gislason said. “We needed that Middle-South of America for which we didn’t have connections. Southwest was kind of that final piece of the puzzle that we needed to be able to do that.”
Launched in June 2021, another low-cost airline based out of Reykjavik has rapidly been moving into the market once dominated by Icelandair. The low-cost carrier Play also serves travelers going between the U.S. and Iceland as well as those transferring through the country on the way to various European and North African capitals.
At the start of last summer, the airline announced new flights from Stewart International Airport (SWF) in New York’s Hudson Valley to Cardiff in Wales, Split in Croatia and Morocco’s Marrakesh. But routes announced to great fanfare do not always pan out — amid low uptake, the airline has also scaled back service to certain European destinations from Baltimore/Washington International Airport (BWI) and Boston Logan International Airport (BOS).
“Since PLAY’s inception, we’ve observed shifts in the market and it is our view that the via-route network is no longer as profitable as it once was,” Play CEO Einar Örn Ólafsson said in a statement at the time. “As a result, we have decided to adjust our business model, which will take effect around mid-2025.”
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