Why Delta Airlines Decided to Invade Iceland

(MoneyWatch)  For many years, Icelandair had the Icelandic market all to itself. Sure, there were some stray flights from SAS to Copenhagen, but for the most part, it was Icelandair's ability to connect people in North America and Europe for cheap that made the model work. In the last few years, however, many airlines have moved in and Delta is the most recent. It will start flights from New York next year. What the heck is going on up there?

I'm not kidding when I say service has exploded. On the European side, Air Berlin and Niki fly to several destinations in Germany and Austria. Germanwings does the same and Transavia flies to Paris. But the biggest challenge has come from Iceland Express. Check out this growing route map for this summer:

If it looks a little spartan on the left side, you're not mistaken. This was the first year of service to Newark, and apparently it's been strong enough that the airline will land in Orlando in the fall and Chicago and Boston next summer. That's a big deal.

And now we have Delta entering the market in the summer of 2011 with daily flights from JFK. Why is this happening? What's the big deal with Iceland. There are actually a lot of reasons.

• Geographically, it's in a great spot. It lies pretty much right on the great circle route to Europe, so it makes connections rather efficient.
• It's only about 100 miles further from New York to Keflavik (the main airport on the island) than from New York to LA, so it's like operating a domestic flight.
• That distance means that a 757 can make it with ease while a 737 can as well. In fact, Iceland Express is flying 737s.
• Fares command some premium. Think about it. Would you be willing to pay more for a flight to Iceland than LA? Yep.
• In crowded New York, the flight departs at off-peak times because of how short it is. The Delta flight leaves just before midnight and gets back around noon.

Now, can the Iceland market support this many flights, especially from the US? That's a good question. Icelandair has long catered to Americans' desire to fly cheap to Europe by throwing a free stopover in as well. For Iceland Express, it's more about getting people to and from Iceland for cheap. Delta will be able to funnel traffic from all over the US into JFK to take them to Iceland. So we're looking at some different targets here, but that doesn't mean there's enough traffic to go around.

Still, I like these moves. Besides the fact that Iceland is a great place to visit (I was there about 10 years ago), it's also an exotic destination that's relatively affordable compared to other places. It's also easy to get to. So if the Icelandic tourist bureau does its job (things are much cheaper there these days), then we could see a booming tourist market during the summer.

During the winter? Not so much.

Related:

• Volcanic Surprise: Icelandair Made Crisis Management Look Easy
• Ash Wednesday: Icelandic Volcano Impact on Airlines Worse Than 9/11
• Delta Air Lines' New York Chief Explains How They'll Win New York

Photo via Flickr user Deivis