A Lost Pioneer

Black clouds for Icelandair

In the days before Freddie Laker and price warfare brought down the cost of air travel across the Atlantic, tiny Icelandic Airlines was the favorite of backpacking students and budget-minded businessmen. Americans going to Europe did not mind if flights often had long layovers at the windswept airport in Reykjavik, Iceland, or if they landed only in backwater Luxembourg. Since Icelandic was not a member of the fare-setting International Air Transport Association, the "hippie airline," as it was nicknamed, hopped the Atlantic for as much as $153 less than major carriers.

In the '50s and early '60s, the airline's piston-powered DC4s and DC-6Bs were usually packed with Americans doing Europe on $5 a day. Business continued to boom after the line switched to nonstop jet service, which was still at cut rates. In 1977 Icelandic carried 240,000 passengers. But then came Freddie Laker's Skytrain flights and subsequent price slashing by the major airlines. Budget flyers could now skip both Reykjavik and Luxembourg and still save money. After losses of $15 million last year, Icelandair, its official name since 1979, slashed the number of transatlantic flights from 23 to 2 per week and laid off 900 of its 1,700 employees. Though it will continue European and domestic flights with a new Boeing 727 and four F-27 Friendships, Icelandair will abandon all but a token run over the North Atlantic. Says Sigur-dur Helgason, Icelandair's chief executive officer: "North Atlantic competition is operating under the law of the jungle."

The Lilliputian line has been hurt by other problems as well. Last year Icelandair's single DC-10 was grounded for 37 days following the crash of an American Airlines DC-10 in Chicago. The airline has also been troubled by a large number of no-show passengers, who had booked with it as a backstop in case they could not get stand-by seats on a major carrier.

Earlier this year Iceland's government gave the company a $5 million loan in the hope that the vacation season would get Icelandair aloft again. But the tourists did not return. The company also attempted a merger with Lux-air, Luxembourg's airline. That also failed to take off. Now Icelandair is negotiating to sell its elderly Boeing 727s to Yugoslavia, and it has leased its DC-10 to Air Florida. Like the flower children it once served, Icelandair is left mostly with memories. -

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