However, international air passenger travel in Iceland has seen several challenging years. Even prior to the start of the COVID-19 pandemic, the country had experienced a substantial fall in passengers. This was largely due to the collapse of the low-cost carrier Wow Air, which had been based at Keflavík Airport and had provided transatlantic connections via Iceland. Passenger numbers fell further during the COVID-19 pandemic, reaching as low as 1.4 million in 2020 but returning to around 6.2 million in 2022.
Leading companies in the Icelandic aviation industryIcelandair Group, the parent company of Icelandair, was the most significant airline operating in Iceland, reporting a market share of 915.2 percent in 2022. They were followed by United Airlines, who had a share of 6 percent. In the same period, Icelandair reported an operating income of 1.3 billion U.S. dollars, a sharp increase relative to the 585 million dollars recorded in the previous year. The airline also saw a significant increase in passengers, with 268,000 passengers transported domestically and 3.4 million international passengers in 2022. In contrast to the poor passenger performance of Icelandair during the COVID-19 pandemic, the Icelandic airline recorded record revenues of over 87 million U.S. dollars from mail and cargo transportation in 2021.
Icelandair gained a new competitor on its international connections from a new Iceland-based low-cost airline in 2021. Fly Play was founded in 2019 and began operations in 2021. In 2022, the airline flew 789,000 passengers on routes between Iceland, Europe, and the East Coast of North America.