Icelandic Prime Minister Considers Airline Oversight Review Following PLAY's Collapse

Prime Minister Signals Review of Airline Oversight

Icelandic Prime Minister Kristrún Frostadóttir has announced that the government may reassess its oversight of airlines following the abrupt cessation of operations by low-cost carrier PLAY. The announcement came after a cabinet meeting where ministers reviewed the airline's collapse and its broader implications. Frostadóttir noted that while current oversight is considered standard, it would be 'reasonable to revisit how supervision is handled' in light of two high-profile airline bankruptcies in recent years.

PLAY Airline Ceases Operations Abruptly

PLAY (Fly Play hf.), an Icelandic low-cost airline, ceased all operations and filed for bankruptcy on September 29, 2025. The sudden shutdown left an estimated 1,750 passengers stranded across Europe and North America, with approximately 9,300 passengers abroad and another 9,000 in Iceland affected. Additionally, around 400 to 500 employees lost their jobs.

The airline cited a combination of factors for its collapse, including:

• Years of financial losses
• Weak ticket sales
• Failed strategic shifts and high operating costs
• Fierce competition in a small market
• Internal disagreements among staff regarding policy changes

PLAY was founded in 2019 and began flying in 2021, aiming to fill the void left by the 2019 collapse of another Icelandic budget airline, WOW Air. The airline's board stated that 'every effort was made to reach a different outcome' and apologized to all those affected.

Government Mobilizes Support for Affected Individuals

In response to the crisis, Prime Minister Frostadóttir convened a cabinet meeting with the Ministers of Finance and Economic Affairs, Infrastructure, and Industry. The Minister of Social Affairs and Housing outlined how the Directorate of Labour is assisting affected staff. A government response team has been activated to assess the wider economic impact and organize support for the approximately 400 PLAY employees. The Wage Guarantee Fund and the Unemployment Insurance Fund are set to cover salaries and benefits for those who lost their jobs, with the Prime Minister assuring that 'the state will make sure workers receive what they are entitled to.'

Passengers affected by the cancellations have been advised to contact their credit card companies for potential refunds or their travel agencies if they booked package tours. While some airlines, such as Condor, offered 'rescue fares,' Icelandair stated it would not offer special fares but would increase seat availability on routes previously operated by PLAY.

Scrutiny on Icelandic Aviation Regulations

The Icelandic Transport Authority is the primary body responsible for regulating and managing the civil aviation sector in Iceland, aiming for a safe, secure, and sustainable system. The Authority had been conducting regular financial oversight of PLAY, in accordance with EU Regulation No. 1008/2008, to ensure the airline could maintain aviation safety standards. Despite this monitoring, the sudden decision to cease operations was unforeseen by authorities.

The collapse of PLAY marks the second major Icelandic airline failure in just over five years, following WOW Air's bankruptcy in 2019. This trend has intensified calls for a review of the existing oversight mechanisms to prevent similar disruptions in the future. Iceland has previously faced scrutiny from the EFTA Surveillance Authority regarding its implementation of EU legislation concerning aviation safety, particularly concerning accident investigation procedures.