Greenland seeks tourism growth with new airports, but not a boom

The (re-)launch of a route last month between Greenland and Northern Canada opens opportunity for Air Greenland to drive growth in the country’s inbound tourism market. Delivering that in a measured manner, however, is a key consideration for the country and the airline. And it comes with significant challenges, even as major investments are being made to deliver the aviation infrastructure to handle the new arrivals.

We have to develop organically, we have to develop sustainably, so the people in Greenland can be a part of this growth. We don’t want to grow rapidly.

– Malik Olsen, Chairman, Air Greenland

Speaking exclusively to PaxEx.Aero during the inaugural flight from Iqaluit to Nuuk, Air Greenland Chairman Malik Olsen acknowledged the competing priorities for the country’s tourism market, and made clear that Greenland hopes to not repeat what it sees as mistakes made by others in growing a tourism sector too quickly.

The focus on including the local communities in the growth plans is something seen across the country. It is also difficult to deliver major infrastructure program investments in the local private sector. Those competing priorities will be challenging to balance in the decade ahead.

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Charting a slower path to growth

The country in the middle of a massive investment program for its international airports, with the new Nuuk terminal opening late last month and the associated runway extension expected to be operational by the end of the year. With that move Air Greenland will transition its long-haul operating base to Nuuk from Kangerlussuaq, bringing more passengers directly to the capital rather than the airport outpost 198 miles to the north.

A similar expansion is underway at Ilulissat, the heart of tourism for the country. That new runway is expected in service by 2026, along with a new terminal building. A third, similar project, is underway in the country’s south.

The new runways will support the carrier’s A330neo operations, reducing the need for some of the Dash 8-200 services within the country. Bringing 300 travelers in to Kangerlussuaq, where none of them want to be, and then carrying them onward 37 at a time makes for challenging logistics and a less-than-stellar tourism experience, with extra travel time and expense.

At the same time, however, the country’s existing tourism infrastructure is stretched to its limits. As Olsen notes, “We know that Ilulissat as a destination is maxed out during the summer season, the high season. The capacity in Nuuk is not that big either.”

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Other infrastructure challenges

Building new airports is not easy in Greenland, with a limited construction season and a need to import nearly all the construction materials. Compared to the other infrastructure needs, however, the airports may be the easiest part.

Unless the cities are keen to displace existing residents from the city core areas there is not much room available to build new hotels and restaurants. Moreover, expanding the city footprints becomes challenging as extending even basic infrastructure to those new builds is likely to come with significant costs. Delivering running water and sewage, for example, is incredibly challenging thanks to the permafrost that sits beneath most of the country’s land.

Building for seasonal occupancy is also a challenge. Olsen expressed optimism for what’s currently the off season, “Of course, we hope that the winter tourism will grow, because we have a lot of a lot of exciting things to to do in the winter in Greenland as well.” But he’s also pragmatic about the demand profile, “I don’t see that the growth only will be in winter, so we have to make growth [happen] in the summer as well.”

Developing stable, organic growth

Air Greenland, and other representatives of the country’s tourism market, want the growth to come in a very measured manner and with a focus on the local community. And the country appears to be studying the history of its neighbors in hopes of not repeating their mistakes.

The boom in Arctic tourism demand is not new; it started in earnest for Iceland around 2009 as that country sat on the brink of economic collapse. Low prices and easy access to the well-developed, major airport at Keflavik allowed for a massive increase in tourism arrivals.

That boom reshaped the country’s economy, as well as the capital city of Reykjavik and the surrounding environs. Not all of that development has been positive, as some parks and services were overwhelmed and infrastructure failed to keep up with the growth.

The Faroe Islands are also growing inbound tourism, but at a much slower pace. It is a shorter flight from the rest of Europe, some 500 miles east of Keflavik. But a smaller airport and limited hotel offerings keep inbound travelers at bay. For Greenland, the goal appears to follow this pattern. As Olsen explains, “That’s something that has been discussed within the tourist industry in Greenland, and a lot of the discussion is exactly that [we] do not want to grow like Iceland. And, actually, when we talk with the Icelanders, they also say, don’t do it like us. So the preferable scenario is that we have a more organic growth, maybe a bit like the Faroese tourism developments.”

With a significantly larger geography to consider, Greenland is building more broadly than the Faroe Islands did. The three new runways under construction will allow a wider distribution of the visitors, which feeds into Olsen’s ideas of how the development will play out. “We can hopefully grow more destinations besides Nuuk and Ilulissat,” Olsen explains. “We want tourists to see other parts of Greenland as well.” That growth is also a potential boon for Air Greenland, as it operates the flights necessary to connect visitors among the major settlement areas.

Foreign competition?

The expanded runways at more desirable destinations could also create competition for Olsen’s airline. Greenland’s west coast is less than 2,200 miles from New York City, bypassing the connection in Iqaluit. It would also not be unprecedented. Air Greenland operated a seasonal 757-200 to BWI in 2007 and 2008.

For a US carrier the route could be served as a daytime flight in both directions; it is arguably too short for a redeye service from the east coast. That would likely require an augmented crew or overnighting at the destination, but it is well within the range of a single-aisle plane with an overwater configuration; ETOPS would not be required. This is the sort of seasonal less-than-daily service that United Airlines, for example, has been trying with its European summer operations of late.

Similarly, European airlines might take a chance on the market, though those flights are all about 800 miles longer than trips to Iceland. The U/LCC airlines that drove the growth in Iceland typically don’t like the longer stage lengths. They also typically don’t cater to markets where the cost to be on the ground is as high as in Greenland. It is decidedly not a bargain destination, and that shows no signs of changing, even as the airport capacities grow.