Iceland's main airport struggles to keep up with hot tourism market, plans $1 billion expansion

  • Tourists to Iceland have more than tripled in the five years through 2017.
  • Airport officials blew through passenger traffic projections set just three years ago when they estimated 8.8 million annual travelers by 2025. They expect to handle 10 million people this year.
  • The airport operator is working on a $1 billion expansion.
Airbus A321 of the Icelandic low-cost carrier WOW air at Keflavik International Airport. 
ullstein bild | ullstein bild | Getty Images
Airbus A321 of the Icelandic low-cost carrier WOW air at Keflavik International Airport. 

A rush of tourists to Iceland has forced the country's state-owned airport operator to rip up its passenger traffic projections as record numbers of visitors descend on the island of hot springs, volcanoes and waterfalls.

The Keflavik International Airport, the entry point for almost all tourists to the country, is working on a roughly $1 billion-expansion to accommodate the crush of travelers and airlines that need more space at what's becoming one of Europe's hottest airports.

In 2015, the country's airport operator ISAVIA projected that Keflavik would handle 8.8 million travelers a year by 2025. It now expects more than 10 million passengers this year and more than 17 million annual travelers in 2030. The airport is already hitting close to max capacity at certain times of the day.

The land surrounding the airport is relatively undeveloped, so the expansion isn't likely to run into the same issues as airports in densely-populated parts of the United States or other countries.

Iceland received nearly 2.2 million foreign visitors last year, according to the Icelandic Tourism Board, more than triple the number five years earlier.

The expansion includes at least 26 new gates, 16 of them connected to the airport, according to ISAVIA, which operates all of the country's public airports. The Keflavik airport is also planning to increase retail and dining space, a welcome addition for travelers dealing with long lines for food or coffee at concession stands. The project will be funded by airline landing fees, concession and other non-aeronautical revenue and loans, airport officials say.

Icelandair and local rival, budget carrier WOW Air have expanded rapidly over the past few years, adding new service from more cities in North America. Other airlines have followed suit. American, United and Delta have recently added Iceland service from the U.S. as well.

One reason for the uptick in passengers is the airport's use as a transit hub between North America and Europe. (Airports count transferring passengers twice -- once when they land and again when they depart on their connecting flight.) WOW and Icelandair offer stopovers in the country. WOW Air's CEO Skuli Mogensen said more of the airline's passengers are flying through Iceland to other destinations, not staying in the country. WOW is planning to begin flights to New Delhi from Iceland in December, touting Iceland's geographical position as a transit hub, one he envisions as a "Dubai of the North."

Because so many passengers transfer at Keflavik, connecting flights are close together which lead to swarms of travelers and then hourslong lulls.

The airport is relatively small, connection times require a minimum of 25 minutes. Connection times at larger airports vary by route and the location of terminals. At London's Heathrow and Tokyo's Narita, for example, this could take about an hour.