Meet the guy who plans to make flights to Europe dirt cheap

WOW Air chief Skuli Mogensen stands in front of one the airline's Airbus A321 aircraft.

Significantly cheaper airfares between Europe and North America are a relatively new phenomenon, but they’re here to stay, according to Skuli Mogensen.

Unfortunately, so are baggage fees.

Mogensen is the head of WOW Air, an upstart Icelandic airline that falls under the so-called “ultra” low-cost variety, a group that’s risen up in recent years to cut domestic air travel costs in Europe and the United States.

Mogensen is now setting out to “offer travellers the cheapest connection between Europe and Canada” according to the airline, which announced Thursday plans to launch two new routes from Montreal and Toronto to the Icelandic capital of Reykjavik. One-way fares start for as low $99 — not including baggage of course.

MORE: Iceland airline to offer ultra-cheap flights to Europe from Canada

He explains why WOW Air, which is launching year-round service next May, is coming to Canada:

Story continues below advertisement

Q: Why do this now?

A few reasons. We launched our flights to Washington and Boston last spring. They have gone way beyond our best expectations. So with that potentially proving the model, the time is right for a low-cost long-haul transatlantic operation. Toronto and Montreal are great next steps.

Q: Fuel, which is an airline’s biggest cost, is a lot cheaper these days since oil has dropped. Is that a reason for expediting your plans – and if oil prices go back up to $100, will you pull back?

Fuel prices affect [airlines] pretty much equally, at least over time. Some airlines are more hedged than others, but I think the primary reason why I’m convinced the low-cost model will work now is that the consumer has been educated successfully both domestically in Canada and North America as well as in Europe.

On both sides of the Atlantic, low-cost carriers have 30 to 40 per cent market share – not in Canada, but in the U.S. and Europe. So the consumer is very well aware, you go online, you do your own booking, and you only pay for what you use. Then you look at the transatlantic market (connecting North America to Europe) and the low-cost carriers only have one per cent market share. To me, that’s a great opportunity to establish the model using Iceland as the hub.

Story continues below advertisement

‘When you look at the transatlantic market [from Canada], the fares are very high. We think we can lower them significantly’

Financial news and insights delivered to your email every Saturday.

Q: But what if oil climbs to $100 again and fuel prices increase for you?

With or without cheap oil, I think our cost structure is more efficient. Certainly much more efficient than the legacy carriers. I think we have a sustainable business model regardless of where oil is. We are definitely committed, and both destinations will be year-round destinations.

We look forward to lowering prices in Canada like we have done in the U.S. and Europe already.

Q: Any plans to open up service to other Canadian airports?

Absolutely. But for now I’m just happy with Toronto and Montreal and we’re focused on that for the time being.

Q: What is your opinion of Canadian airfares – are they too high? Obviously you saw an opportunity to shake things up.

When you look at the transatlantic market [from Canada], the fares are very high. We think we can lower them significantly.
Story continues below advertisement

Q: Fees on things like baggage are relatively new to Canada, but are common elsewhere. Does WOW Air charge for luggage and other “ancillary” services?

You only pay for what you use. There is an extra charge for sure, but if you don’t want a bag you don’t have to pay for it.

Q: Any plans to make direct flights between North American cities, say to Boston or Washington where you already fly?

For now, everything goes back to Iceland.

Sponsored content