Is an airline still an airline if it doesn’t actually fly the planes?
That might be the question Iceland faces soon if Indigo Partners gets creative with its recent plan to invest in WOW Airlines. Indigo, the successful backer of airlines like Frontier, WizzAir, Volaris, and previously Spirit Airlines, has stepped in to help WOW, the Icelandic low-cost carrier, which is struggling financially after Icelandair backed out of acquiring it.
Imagine this scenario: unsuspecting passengers board a Frontier plane from Trenton to Reykjavik, and then transfer to a WizzAir plane from Reykjavik to Europe, all while holding a WOW ticket. WOW would fulfill its flying obligations by contracting flights from Frontier and Wizz as much as Icelandic regulations allow. Administrative functions could be managed by either Frontier, Wizz, or both.
This virtual airline model would let Indigo and WOW capitalize on cheaper labor in Hungary and the U.S., compared to Iceland. Wizz Air already boasts some of the lowest operational costs in Europe, nearly matching those of Ryanair, the world’s largest ultra-low-cost carrier. Frontier’s costs are even lower according to U.S. Department of Transportation data. Together, Frontier and Wizz could operate flights at costs lower than WOW, and far below those of rival Icelandair.
Moreover, this virtual airline approach would give WOW the flexibility to handle seasonal passenger demand. The transatlantic market is very seasonal, with summer traveler numbers often more than double that of winter. Low-cost carriers, which mainly cater to leisure travelers rather than high-paying business passengers, are particularly vulnerable to this fluctuation. But as a virtual airline, WOW could offer a lighter winter schedule without the expense of year-round aircraft leases. Meanwhile, Frontier and Wizz could use their planes on leisure routes in North America and Europe during the winter months.
A more familiar example of a virtual airline is the code-sharing among members of the OneWorld, Star, and SkyTeam alliances, as well as other partnerships. Around 320,000 passengers buy a ticket with one airline’s flight number but end up flying on a different airline every day, according to IATA data. These marketing alliances simplify connections and offer more scheduling options, even if they reduce competition somewhat.
Major airline alliances do set standards for their members, like rules on lounge access and upgrades. They work to minimize confusion about check-in procedures and finding reservation numbers online. But they can’t change the reality that a customer might feel like they were promised a Honda but got a Ford instead. Despite the real benefits of these alliances, modern airlines have made travel more commoditized, leading customers to prioritize fare and schedule over airline loyalty.
However, this brand blurring isn’t a problem for ultra-low-cost carriers (ULCCs). These carriers focus on low fares above all else. Frontier promotes “low fares done right,” WOW asks “how low can we go,” and Wizz Air highlights the opportunities cheap tickets create. The straightforward focus of Indigo Partners’ airlines—and other ULCCs like Ryanair—is a major strategic advantage. This clear mission means a virtual WOW is unlikely to disappoint its customers.
Indigo has the potential to transform Icelandic aviation. By using its other companies to provide WOW’s service, Indigo could bring ultra-low costs to a country with one of the highest living expenses in the world, second only to Switzerland. This shift also signals the fading significance of national airline flags in today’s global market.