An Icelandic low-cost airline that had been in the process of shifting a significant part of its operations to Malta has collapsed, abruptly halting its plans and leaving hundreds of employees without work.

PLAY, which was established in July 2019 and began operations in June 2021 from its base at Keflavík International Airport in Reykjavik, initially connected Iceland to key European cities including Alicante, Tenerife, London, Paris, Copenhagen and Berlin. However, the airline struggled to achieve sustainable financial performance, culminating in its decision to cease operations.

On 29 September 2025, the airline stopped all flights with immediate effect. Around 400 employees lost their jobs as a result.

In a statement announcing the shutdown, the board of Fly Play hf. said it had “decided to terminate operations” and confirmed that all flights had been cancelled. The company said it would work with authorities and staff to wind down operations.

The board cited a combination of long-standing financial underperformance, weak ticket sales in recent months, and internal disagreements over strategic direction as key factors behind the collapse. It also acknowledged that recent efforts to restructure the business had failed to deliver the necessary turnaround.

“Last fall, Play introduced a new business model that initially inspired significant optimism,” the board said. “Unfortunately, it has now become clear that these changes cannot deliver the results needed to overcome the airline’s deep-seated financial troubles.”

The collapse comes just months after the airline had made significant commitments to Malta as part of a broader restructuring strategy.

In late 2024, PLAY announced plans to overhaul its business model, shifting away from transatlantic connections between Europe and North America to focus instead on leisure routes between Iceland and European destinations. Central to this strategy was the establishment of a Maltese subsidiary, Play Europe, which would serve as the airline’s operational hub.

The subsidiary was granted an Air Operator Certificate (AOC) by Malta’s Civil Aviation Directorate on 27 March 2025, paving the way for the airline to base its operations on the island.

As part of the transition, PLAY intended to transfer its entire fleet of 10 Airbus A320neo-family aircraft to Malta. Under the plan, four aircraft would remain based in Iceland to serve outbound leisure routes, while six would be leased to other operators amid strong demand for modern narrowbody jets.

The airline had already secured a two-and-a-half-year lease agreement with SkyUp Airlines for four aircraft and was in discussions with other potential lessees for the remaining jets. It had also planned to begin wet leasing three aircraft through its Maltese subsidiary starting in spring 2025, with further expansion to follow.

Additional proposals unveiled in mid-2025 included scaling back operations in Iceland, ending all remaining U.S. routes by October 2025, and transitioning into a virtual airline structure while retaining the Maltese AOC for operational purposes.

Despite these efforts, the restructuring ultimately proved insufficient to stabilise the business, bringing an abrupt end to what had been a notable aviation investment initiative linked to Malta.