Icelandic low-cost carrier Fly Play has ceased operations and cancelled all flights worldwide, ending its services four years after launching in 2021.
The airline announced the decision on 29 September 2025, citing financial underperformance and the failure of restructuring efforts, leaving thousands of passengers stranded.
The sudden collapse disrupted connections between Reykjavik and Europe, including nine Spanish destinations, as well as North America. Keflavík International Airport reported that 12 flights, six departures and six arrivals, were cancelled immediately after the announcement, affecting about 1,750 passengers. Airport staff assisted travelers with updates and informed them of their rights under EU regulations.
Impact on Passengers and Routes
Fly Play had built a network serving major European cities and seasonal routes to the United States. In Spain, the airline connected Reykjavik to Madrid, Barcelona, Valencia, Alicante, Málaga, Mallorca, Tenerife, Gran Canaria and Fuerteventura. The cancellation of all services forces travelers to rebook with other carriers such as Icelandair and Iberia Express, some of which are offering special “rescue fares.”
In its statement, the airline said: “Fly PLAY hf. has ceased operations, and all flights have been cancelled. We kindly advise you to check flights with other airlines. Some carriers may offer special ‘rescue fares’ considering the circumstances.” Passengers who purchased tickets by credit card are advised to contact their card issuer for refunds, while those who booked through European Economic Area travel agencies should seek assistance from their agents. Fly Play also reminded customers that “some rights also may apply under EU air passenger regulations.”
The timing of the closure has created additional disruption as many passengers had already planned autumn and winter trips to Iceland, a peak season for northern lights tourism and outdoor winter activities. Travel agencies in several markets are now working to re-accommodate affected clients on alternative flights.
Financial Struggles and Restructuring Efforts
Fly Play had attempted a turnaround earlier in 2025, securing $20 million in funding and revising its operations by scaling back transatlantic services. The airline also sought to transfer its air operator certificate from Iceland to Malta and rely more on wet-leased aircraft. However, these measures did not resolve its financial difficulties.
The board attributed the decision to long-term weak ticket sales, persistent losses, and internal disagreements over the company’s strategic direction. The shutdown leaves approximately 400 employees without jobs, while creditors and lessors are expected to file claims during bankruptcy proceedings.
Industry analysts noted that Fly Play struggled to maintain profitability in the competitive low-cost sector. Rising fuel costs, high competition on European routes, and the challenge of sustaining transatlantic services from a small home market contributed to the financial strain. The airline’s model attempted to replicate the approach of earlier Icelandic carriers, but suffered from similar vulnerabilities.
The closure of Fly Play is the latest in a series of failures among Icelandic airlines, following the collapse of WOW Air in 2019 and Primera Air in 2018. These collapses highlight the difficulty of sustaining low-cost operations from Iceland’s limited market while competing for both European and long-haul passengers.
Analysts expect Icelandair to consolidate its position as the country’s dominant carrier, while other European airlines may step in to capture demand on affected routes. However, the loss of Fly Play reduces competition and may affect airfares to and from Iceland in the near term.
The airline’s abrupt exit underscores the risks of the ultra-low-cost model in smaller aviation markets. Despite early optimism, Fly Play faced structural challenges in balancing demand between transatlantic and regional services, and its attempts to adapt through restructuring proved insufficient.
Passengers are now turning to EU compensation mechanisms and refund channels to recover the value of their tickets. Regulatory authorities in Iceland and the European Union will oversee the process of passenger claims and the distribution of the airline’s remaining assets.
The closure of Fly Play marks the end of a short-lived carrier that had sought to provide affordable links between Iceland, Europe, and North America. Its failure reinforces the difficulties new airlines face in a volatile global aviation sector, particularly those based in small markets with limited domestic demand.
