WOW Air bets on BWI for push into ultra-low-fare trans-Atlantic market

WOW Air's big bet on BWI

Serial entrepreneur Skuli Mogensen launched WOW Air three years ago with an eye on entering the emerging market for ultra-low-cost flights between the U.S. and Europe — with his native Iceland as a well-positioned connection in between.

Not long after, Mogensen began discussions with officials at BWI Thurgood Marshall Airport about making the Anne Arundel airfield one of WOW's first North American hubs, a deal announced last fall.

Interest in the new route — first marketed with super-low $99 fares for connecting flights to London — has been so strong that WOW pre-emptively changed it from a seasonal offering to a year-round option, its schedule from four days a week to five, and its start date from June to May.

"The bookings into the summer and fall look very good," Mogensen said Monday in the BWI offices of the Maryland Aviation Administration. (He flew in Friday on the first flight.)

The move — not just the new route, but his entry into the airline business — was a gamble, Mogensen acknowledged. "Everyone told me it was impossible and I'd be crazy to try," he said.

But it's also one he is confident will prove prescient.

"I don't think there is a low-cost trans-Atlantic business currently, but I think it will emerge," he said. "For us to be on the forefront of that is very exciting."

The former telecommunications and mobile software executive expects the cost for one-way flights from Baltimore to Reykjavik and beyond to Europe to remain in the range of $150, with even cheaper deals popping up from time to time.

Paul J. Wiedefeld, the CEO of BWI, said the airport has a history of "not pigeonholing ourselves" into one airline market, and jumping into the ultra-low-cost trans-Atlantic market early with WOW will help it keep a diverse portfolio.

"The industry is constantly changing," he said. "We think getting in as early as we can to that market is very important."

The addition of WOW also adds to the airport's burgeoning collection of international connections at a time when it is investing tens of millions of dollars to increase its international capacity.

In order to maintain low costs, WOW — which also flies to Boston — relies on a fee model in which it charges for so-called extras, such as seat selection, checked bags, flight changes or cancellations, and so on. Mogensen calls this a "pay for what you use" model.

The airline also focuses on bookings through its own website, uses smaller planes with better fuel efficiency than some of its point-to-point competitors, and gets higher "utilization" of its seats, Mogensen says.

He said BWI was an attractive partner because Iceland Air once flew there — it now flies through Dulles — and the region is well-known to Iceland's population. It's also a major hub for Southwest Airlines, which means fliers will be able to connect to BWI from all across the country for a connecting flight to Reykjavik.

A WOW airplane also can fly from Reykjavik to Baltimore, back to Reykjavik, to Europe, and back to Reykjavik again in a 24-hour period, a key "turnaround cycle" that Mogensen wants to maintain, he said.

Tom Parsons, an industry analyst at BestFares.com, said the type of aircraft WOW is using and its rejection of large fuel surcharges like those of many legacy carriers — which sometimes collect more in surcharges than they spend — probably give it some room to cut fares, but customers should keep an eye on the extra fees.

"When you look at their airfares compared to everybody else's out of Washington, D.C., you've got to wonder how they make money sometimes," he said.

Parsons hasn't heard any stories about cost pile-ups on WOW flights, he said, but small fees can add up.

"The consumer has to be a little bit more careful. What they see and what they think they might get are two different things," he said. "You've just got to be careful and add up the good, the bad and the ugly."

Wiedefeld said one additional reason WOW is able to keep costs down compared to competitors in Washington is that BWI is cheaper for airlines to fly into based on its cost-per-enplaned passenger, a key indicator of airport affordability and a selling point that BWI officials make known when they are discussing new routes with carriers.

Jonathan Dean, a BWI spokesman, said BWI's cost is $9.88, compared with $11.26 at Reagan National Airport and $26.44 at Washington Dulles International Airport.

"It's one of the few things that they feel makes a difference," said Wiedefeld of low-cost carriers looking to cut around the edges when fuel and other costs are inflexible or unpredictable.

Mogensen said WOW plans to announce three additional destinations in the Northeast next year. Expansion beyond that is anyone's guess, he said.

In it's first year, WOW had 90,000 passengers. Last year it had 500,000. This year it expects to have 750,000, and next year it expects 1.2 million, Mogensen said.

On Monday, Parsons compared three roundtrip flights from the Baltimore-Washington region to Reykjavik on three carriers. The WOW flight, a direct shot from BWI, was about $400 cheaper than a nonstop Iceland Air flight from Dulles and about $250 cheaper than a one-stop Delta Air Lines flight from Dulles.

Even if the "incidental" extra fees added up, Parsons said, WOW likely would come out as the cheapest option.

"They're saying if you want the bare bones, we'll give it to you dirt cheap."

krector@baltsun.com

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