Tuesday, 10 July 2018

Icelandair Group lowers net profit predictions for 2018

The premier full-service airline from Iceland, Icelandair has this week lowered its projected net profit predictions for 2018.

The Icelandair Group says that conditions are less favourable than it expected earlier this year and as such is predicting its net profit would be lower than prteviously suggested , somewhere in the range of  US$120-140 million. 

Icelandair said that it is apparent that performance in the second quarter will fall short of its  projections, citing disruptions in its flight schedule, delays in commissioning new aircraft, adverse weather conditions and other negative factors, had increased costs whilst not m,aking as much money.  

The carrier says projections of rising average fares in the second half of the year have so far not materialised. This is in spite of a 50% rise in fuel prices over the past 12 months. As a result, the Company has decided to reduce its revenue forecast for the second half of the year. Iceland Travel has seen a significant number of cancellations recently which will negatively impact that line of the Group’s business this year. In addition, the increase in capacity across the Atlantic in some of the Company’s key markets has affected peak-season fare trend. The Company is also investing in new destinations this year to strengthen its Route Network for the future. The rate of bookings on flights to these destinations is falling short of anticipations, which will have a negative impact on the results of this year.

For the longer term, the Company’s prospects are favourable – the Company is seeing growth in most markets, it is financially strong and enjoys a solid market position. At the time of publication of the interim financial statement for the first quarter, the Company presented its goal of returning an EBIT ratio of over 7% in the long term, as of the year 2019. That target remains unchanged.

Björgólfur Jóhannsson, President and CEO said, “The situation we are confronted with at present is a considerable disappointment. The average fare trends we assumed for the second half of the year do not appear to be materialising and for this reason we are lowering the Company’s revenue forecast. The fare trends to important destinations have not been in line with our expectations, which has negatively impacted our forecast. Prospects have been deteriorating in the Icelandic tourist service segment, in particular for Iceland Travel. The extensive structural changes that the Company has been through in recent months have mostly been successful and a number of actions have been undertaken to strengthen the Company for the future. The year 2018 is a year of profound changes and extensive investment, which will enable the Company’s future growth and prosperity.”