ICE WARS

Following the recent announcement that Icelandair has purchased a 16% share of Easyjet, it has been revealed that this is not the first time that the airline has made moves into the low fare sector.

Iceland’s state radio station RUV recently discovered that Icelandair had purchased IcelandExpress.org and IcelandExpress.tv, in an effort to procure their low fare rival’s customers who incorrectly entered Iceland Express’ internet address.

The ploy was aimed at diverting these customers automatically to Icelandairs UK website, where they hoped to maintain their interest and secure a sale. Icelandair apologised for what had happened blaming an internal error; they have since disabled the link. An Iceland Express spokesperson responded saying. “We are proud that Icelandair feels the need to use our name to boost sales.”

Iceland Express has bolstered its hold on Iceland’s low fare market, by securing funding from a private investor with previous links to Icelandair. Johannes Kristinsson, now the majority shareholder of Iceland Express started buying shares in Icelandair with his former partner, a former board member of the airline eight years ago, amounting to a 9% stake. The two sold out earlier this year making a £9 million profit. A spokesperson for Kristinsson commented. “Johannes felt it was the right time to sell. He’d been following the progress of Iceland Express since its launch back in February 2003 and likes the low fare concept.

The London to Reykjavik route has been subject to a ‘David and Goliath’ type contest following Iceland Express’ emergence, with Icelandair applying pressure to drive the newcomer out of the market., Icelandair has dropped fares by more than 50% on their London flights in an effort to force Iceland Express out of the market. The Icelandic Competition Authority has ruled that this behaviour is anti-competitive and further investigation is under way. In the meanwhile, Icelandair continues the predatory pricing, sacrifying over 25 million GBP in passenger revenues in one year. The ‘Webgate’ revelation is the latest ruse within their dirty tricks campaign.

Since Iceland Express first started inflight sales, Icelandair has intimidated suppliers of popular taxfree goods, insisting they alienate Iceland Express or face losing the existing business from Icelandair. About 15 such instances have been recorded by suppliers relating to threats from Icelandair’s inflight sales division. One supplier who decided to stick to Iceland Express had their product immediately thrown out of Icelandair’s planes, only to be asked to do business a month later after Icelandair failed to find satisfactory replacements. Many suppliers have become used to Icelandair’s “us or them” approach that they feel obliged to obey due to Icelandair’s big buyer status.

Despite the pressure, Iceland Express has made Iceland more accessible than ever, boosting tourism figures by as much as 25% and attracting strong support from both Icelanders and foreigners, who are keen for low fares to remain.