New Regulations Take Effect
Iceland has enacted new, stringent rules governing the deregistration of aircraft, a measure designed to protect state-owned airport operators from significant financial losses due to airline bankruptcies. The new regulations, introduced by Minister of Infrastructure Eyjólfur Ármannsson, stipulate that aircraft cannot be removed from the Icelandic aircraft register unless all outstanding payments to airport operators, primarily Isavia, are fully settled.
Previously, air travel law only required airlines to resolve such financial matters with the Icelandic Transport Authority, not directly with the airport operator. This change grants airport companies greater leverage to recover unpaid fees before aircraft can be deregistered and potentially moved abroad.
Response to Recent Airline Failures
The decision to tighten these rules comes in the wake of financial difficulties and bankruptcies experienced by several Icelandic carriers. Notably, the collapse of WOW air in 2019 and, more recently, PLAY in the autumn of 2025, left hundreds of millions of krónur in unpaid airport charges.
The bankruptcy of low-cost airline PLAY, which ceased operations just days before the new rules were announced, highlighted the vulnerability of the previous system. Reports indicated that PLAY owed Isavia approximately ISK 500 million in unpaid fees. However, under the old legal framework, Isavia was unable to legally hold the airline's aircraft, with most of PLAY's fleet having been flown out of Iceland before the new regulations were in place.
Lessons from Past Incidents
A similar situation arose during the WOW air collapse in 2019, where Isavia attempted to ground a leased jet over an estimated ISK 2 billion in unpaid fees. However, the Icelandic Supreme Court ruled that action unlawful, stating that third-party property could not be used as collateral without clear statutory authority.
The new regulation aims to close this loophole. It applies not only to future cases but also to aircraft currently undergoing deregistration, requiring operators to provide proof that all outstanding charges, including airport and air traffic control fees, have been cleared. The regulation also empowers airport authorities to ground planes until payments are settled.
Industry Implications
While the new rules are intended to safeguard the financial interests of airport operators, industry observers have voiced concerns. They suggest that these stricter requirements could potentially complicate aircraft financing for airlines based in Iceland, as lenders typically seek flexibility to reclaim aircraft in the event of an airline's failure.
5 Comments
Raphael
This regulation provides much-needed leverage for airport operators to collect debts, which is fair. But it raises valid concerns about the long-term viability and attractiveness of Iceland as a base for aviation businesses due to financing difficulties.
Donatello
The previous system clearly had vulnerabilities, as seen with WOW air and PLAY. However, empowering airports to ground planes could lead to complex legal battles with lessors and complicate aircraft recovery for legitimate reasons.
Habibi
Protecting state-owned airports from significant losses is understandable, but there's a risk this could deter new airlines from establishing in Iceland, impacting competition and tourism.
Bermudez
Overreach! Makes financing impossible for startups.
Mariposa
Unfair to lessors who own the aircraft. This is a mess.