Airlines battle for a slice of the Arctic – who stands to gain?

It is early December at Iceland’s Keflavík International Airport. A crowd of journalists and aviation executives have weathered the bitter cold to watch a single plane land on the runway and park in one of the hub’s hangars.

Onlookers applaud as the aircraft slows to a stop and its pilot waves a white Airbus flag out of the window, an ode to a first-ever partnership between the French planemaking giant and Iceland’s national airline, Icelandair. The flag carrier had just achieved a huge milestone in its 87-year history, completing the first delivery of an Airbus aircraft, the long-range A321LR, which it intends to use to carry more passengers across the Atlantic.

Speaking to City AM from the hangar, Icelandair’s chief executive Bogi Nils Bogason is bullish on the airline’s prospects. A slight dip in demand following last year’s volcanic eruption has all but recovered and the latest passenger figures bring its yearly total to some 4.3m, up eight per cent on 2023.

“The outlook is quite promising for next year,” Bogason adds, keen to stress that “media scaremongering,” probably fuelled by memories of the 2010 ash cloud that brought havoc to Europe’s airways, was to blame for a surprise tail-off last winter.

Wind the clock back just a few decades though and the sight of an Airbus flag in Iceland would have felt more than a little out of place. The country had yet to benefit from a boom in tourism, which took off in the dark days following the 2008 financial crisis and now sees the number of holidaymakers far outstrip its indigenous population.

More than a third of Icelandair’s passenger traffic is now made up of tourists, despite the country also acting as a key connecting hub for routes between Europe and the US.

Reykjavik, a once-tiny fishing village, has become a small city that plays host to a number of major international firms. Driven by foreign tourism, Iceland’s economy is now one of the fastest-growing in the OECD.

It is a remarkable story, which has as much to do with a string of volcanic eruptions, as with the island’s array of glaciers, ice caves and steaming geysers.

Yet it comes as part of a wider picture of surging demand for Arctic regions, which has at points pitted economic growth against the concerns of environmental groups and local populations.

Barely a couple of weeks before Icelandair’s first Airbus jet landed at Keflavik, Greenland’s Nuuk Airport took its first ever international flight from Copenhagen, effectively opening the territory to the world. An influx of Americans are expected to follow and work is already ongoing to open two more hubs at Illulissat in the west and Qaqortoq in the south.

Travel in general has boomed since borders re-opened after Covid-19 era lockdowns. But Jacob Nitter Sorenson, chief executive of Greenland’s national airline, Air Greenland, told City AM he’d witnessed an “increasing interest in the Arctic” in recent years, on top of wider industry trends.

A combination of adventure tourism, untouched landscapes and unique sights such as the fabled Northern Lights, is his explanation. He also blames climate change. “With the heat in the Med in Southern Europe and Europe in general, people want to get away from those massive temperatures.”

The sparks behind Greenland’s nascent tourism industry chime with those of Iceland and the wider Arctic Circle, but the Greenland native can’t resist a quip at his rival. “Iceland is so far ahead on the tourism side, but I always laugh because in Iceland they sell Northern Lights trips. You can’t really see the Northern Lights in Iceland.

“In Nuuk, it’s light at night during the summer, but in late August when it gets dark, then you see the Northern Lights every evening and it’s just all over the place. In Iceland, they will sell you a Northern Lights trip even when it’s cloudy.”

He admits though, Greenland is “never going to be a mass tourist destination.” The country simply doesn’t have the capacity or infrastructure, and is harsher than Iceland. A change akin to its neighbour is also something many in the country are seeking to avoid. “We have a fragile environment, a fragile community, and we want to protect that,” Sorenson said.

Still, there is a huge amount of money to be made and plenty are looking to cash in. Air Greenland’s boss told City AM there had been “a lot of interest” from foreign investors in Europe and North America. He couldn’t disclose the names but cites a recently unveiled partnership with the London-based expedition cruise line company, HX Hurtigruten.

Amy Hope, managing director of Newcastle-based Aurora Zone, said the firm was forecasting “continued growth in demand for Arctic travel” from the UK. “Finnish Lapland, in particular, is seeing a surge in popularity”, she added, primarily due to its “accessible flight routes, uncrowded ski slopes, and aurora hunting opportunities.”

Now, some of Europe’s biggest airlines are beginning to stake their claim for a piece of the Arctic.

British Airways and Easyjet both added Norway’s Tromso, which sits comfortably within the Arctic Circle, as their most northerly destinations this year. BA’s chief planning officer Neil Chernoff told City AM early interest had been “incredibly encouraging,” with the airline already extending its season to April 2025.

According to data provided by the aviation analytics firm Cirium, scheduled flights between the UK and Tromso are up a massive 296 per cent year-on-year this December. “These locations offer unique experiences such as whale watching, skiing, mountaineering, and getting the best views of the aurora borealis,” Chernoff added.

Annsi Partanen, Finnair’s European market director, said demand from Europe for Arctic travel had risen dramatically during the winter months and around the Christmas peak. The carrier is offering its largest ever schedule to Lapland this year, with 65 flights per week between Helsinki and Rovaniemi. It also recently launched summer flights to the Norwegian city of Bodo.

“When talking about travel to the Arctic, we must not forget the latest trend and the rise in demand for ‘coolcations’ during the hot summer months, where we see travellers now heading north in search of a summer getaway in more bearable weather conditions than for example in Southern Europe with its extreme heat,” Partanen added.

Airbus executives in Keflavik were tight-lipped when asked about deliveries to airlines with a major presence in arctic regions. Alongside its new Icelandic partner, the planemaker counts Finnair, Air Greenland and Norwegian’s subsidiary, Arctic Aviation Assets, among its customers.

Any such scrap for market share comes at a price and arctic tourism has not always sat well with local populations. In Iceland and Greenland, issues remain.

Supply of long-term housing has proven a big problem for Icelanders, and the surge in tourism has fuelled a climate of inflation. In an interview with Bloomberg in January, Finnbjorn Hermannsson, president of the Icelandic Confederation of Labor, warned: “Tourism has been creating inflation and the general wage earner is paying for it.”

In Greenland, where 89 per cent of the population is Greenland Inuit, there is growing concern that interest from foreign companies will mean profits are not pumped back into the local economy.

The anger from locals was such that a cruise ship entering the port of Illulissat was blockaded in the summer, amid claims it was giving business solely to foreign tour operators.

And there is always the problem of the environment. Scientists have warned that previously untouched areas of outstanding natural beauty may be spoiled by a continued influx of travellers to far-flung desstinations, while ever-growing demand for flying has left the aviation industry’s climate targets looking ambitious at best.

Iceland’s economy may have expanded, but its glaciers are shrinking dramatically. Photographs over a thirty year period showing the extent of ice loss from its largest glacier, Vatnajokull, attracted global attention in 2021.

There is, as ever, a balance to be struck between economic growth and environmental protection. The arctic is becoming more accessible, but it’s also coming under pressure.