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Iceland's Wow Air eyes more U.S. flights after cheap tickets fly

Iceland is the key to cheap transatlantic flights
Iceland is the key to cheap transatlantic flights

Icelandic low-cost airline Wow Air is looking to fly daily from Europe to the United States, after cut price tickets were snapped up for the five-times-a-week flights it will start from next year.

The airline offered tickets at £99 ($158) one way from London to Boston via Iceland starting from March.

"At that price, frankly, it sold out overnight," Skuli Mogensen, founder, owner and chief executive of Wow, told Reuters in an interview on Monday on the sideline of a travel conference in London.

He said this had given the airline confidence to try to boost services, and it would add four more planes to fly between Iceland and the United States from 2016.

"We've been working hard to find additional capacity because clearly we see that there is a huge opportunity to do what we're doing."

London to Boston flights on the Wow Air website typically sell for around 317 pounds, including booking charges, similar to flights offered on the British Airways website.

Watch: Where has 'cuddly' Ryanair gone?

Budget airlines have historically found it tough to make money on long-haul flights, where longer flying times mean there are fewer options to cut costs, and transatlantic travel has been a tough nut to crack given high competition.

Laker Airways began low-fare 'Skytrain' flights between London and New York in the late 1970s but went bust in 1982, while U.S carrier People Express was forced to seek a buyer in the mid 1980s after rapid expansion led to high debts.

Norwegian Air Shuttle another low-cost carrier, began flying transatlantic routes in 2013, although plans to expand have met with resistance in the United States, and even Ryanair <RYA.I> has said it will be several years before it has the planes to operate effectively.

Wow currently operates four Airbus A320 planes on lease between Iceland and European destinations including London, Berlin and Copenhagen. Two Airbus A321 planes will fly passengers to Boston and from June, also to Baltimore Washington International, around 32 miles northeast of Washington D.C.

"I don't see why the low cost model will not have a 30 percent market share (of trans-Atlantic) in the next five to ten years," Mogensen said, up from about 1 percent currently.

Read More Why Asia's airlines aren't delivering profits

The former telecoms entrepreneur launched Wow in 2011 with a plan to bring the low-cost model, which led by Ryanair and easyJet has transformed short-haul aviation in Europe, to the long-haul trans-Atlantic market, one of the most competitive in the world.

In Asia, the low-cost long haul model is thriving thanks to the likes of AirAsiaX.

Lufthansa, Europe's largest airline by revenue, is also looking at setting up a low-cost long-haul brand, with plans to be presented in December.

Rene Steinhaus, a consultant at AT Kearney, says filling planes is crucial in making low-cost long-haul profitable.

"There's not many ways to save costs on long-haul. For me, the decisive factor is how full you can get your planes," he told Reuters, saying that carriers entering the space would need to ensure planes are 95 percent or even completely full.

Mogensen said that Wow Air has an advantage over competitors because flying via Iceland means it can use smaller jets, like the A321, that are easier to fill and which represent a significant cost saving because the fuel bill is lower than the larger aircraft needed to fly non-stop across the Atlantic.

Mogensen said that Wow recorded its first profitable period since it started in the third quarter of this year and was confident for the future.

"Even with this aggressive growth I expect to be profitable on a going forward basis and our assumption is that we'll continue to fly at 90 percent average load factors,"

Mogensen owns 100 percent of Wow at the moment but could look to reduce this holding to help fund his company's expansion in the medium term, he said.

"It would interesting to find partners, investors, some time in the next 12 to 24 months," he said, adding that any investor would have to add value.

"Someone that understands the trans-Atlantic opportunity or adds value from the low-cost carrier side."

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