Game over for Icelandic LCC as PLAY ceases operations
September 29, 2025
Icelandic low-fare carrier, PLAY has confirmed on 29 September that it has ceased operations and all flights have been cancelled.
Thousands of passengers have been left stranded and needing to re-organise their return journeys following the airline’s abrupt closure. Around 400 people are also expected to lose their jobs.
PLAY’s collapse follows LCC’s exit from US links
The low-cost carrier’s (LCC’s) announcement on Monday follows a decision earlier this year by PLAY to halt all flights to and from North America from October.
Speaking in June, PLAY’s CEO Einar Orn Olafsson said the carrier was “focusing on the profitable aspects of the business – sun destination flights – and discontinuing those that have not yet yielded results.”
It was also revealed that with its focus on point-to-point connections from Iceland to leisure destinations, mostly in southern Europe, the airline planned to scale back services to destinations in northern Europe.
A key component of this transformation was the transition, confirmed in March, of PLAY’s Air Operator’s Certificate (AOC) from Iceland to Malta.
The opportunity to operate under a Maltese AOC would have provided regulatory and financial advantages, particularly in aircraft leasing. The LCC had also expressed its interest in expanding its ACMI and charter operations for other airlines.
PLAY’s “painful” decision
With all flights now cancelled, Fly Play HF said it will work closely with authorities and employees to implement necessary measures to wind down operations.
“The Board and management of PLAY emphasise that every effort was made to reach a different outcome,” read a statement from the airline.
“This decision is the most painful one imaginable in this situation and has only been taken because all other options were deemed exhausted. The board sincerely apologises to everyone negatively affected by this outcome.”
Reasons behind PLAY’s decision to cease operations
Several reasons were listed behind the decision to cease operations. These include weaker than expected company performance and poor ticket sales in recent weeks.
In addition PLAY also said that “months of negative media coverage and discontent among employees due to changes in the company’s strategy,” had also led to the company’s downfall.
“Great hopes had been pinned on the revised business model introduced last fall, which at the time was considered a source of considerable optimism,” the statement continued.
“Unfortunately, it has become clear that these changes cannot deliver results sufficient to overcome the company’s deep-rooted challenges that have built up over time. In hindsight, the new business plan should have been implemented earlier.”
🔴 Iceland’s PLAY Airlines has ceased operations as of today, canceling all flights following financial struggles, weak ticket sales, and staff unrest. A 2024 restructuring shifted focus to Europe, cut US routes, and relocated operations to Malta, but was ultimately unsuccessful. pic.twitter.com/CR7mI7lplW
— Airways Magazine (@airwaysmagazine) September 29, 2025
PLAY’s history in brief
Launched in 2019 by former WOW Air executives, PLAY was backed by Icelandic and Irish investors. Commercial operations began in June 2021 with flights from Keflavik International Airport in Iceland to London Stansted in the UK.
With its bright red livery and fleet primarily comprised of Airbus A321neo aircraft the LCC quickly expanded its network to other European cities, including Paris, Berlin and Copenhagen. Later flights across the Atlantic to the US were launched, starting with Boston and Baltimore in 2022. In 2023, flights to Hamilton and Ontario in Canada were also launched.
However, with financial pressures mounting the airline announced its restructuring strategy in early 2025. This included the creation of its Maltese subsidiary, the reduction of transatlantic operations and a focus on sunny European hotspots. Plans to privatise the company were later abandoned, ultimately resulting in the airline’s collapse. The airline operated a fleet of 10 aircraft, including six A320neos and four A321neos. In line with its restructuring, PLAY had previously announced plans to retain the four A321neos for scheduled operations out of Keflavik, while the remaining six aircraft were being wet leased to other carriers.
What does PLAY’s closure mean for Iceland’s aviation sector?
The demise of PLAY will impact both tourist inflows and outbound travel by residents. Flag carrier, Icelandair will likely pick up displaced demand in the immediate future. However, it is expected that for cost-sensitive travellers or secondary routes where there was no real competition for PLAY, traveller options will shrink.
The cessation of flights will also impact airport operations. Icelandic hubs, including Keflavik will see a drop in traffic and therefore lost revenues from landing fees, ground handling services, passenger spend and other non-aeronautical activities.
Given PLAY had already leveraged leasing its aircraft as part of its restructuring model, some of its aircraft may now be sold or leased to other operators, which could shift aircraft supply in the region.
On the upside, the gap left by PLAY could also provide an opportunity for new carriers or even existing ones to expand their operations.
However, without a budget carrier, whether Iceland can maintain its current levels of tourism will depend on how responsive other airlines are.
