03 May, 2019

More losses at Icelandair as the carrier extends its cover for the Boeing 737 Max to mid July.

737 Max                              Photo Icelandair
The Icelandic airline Icelandair has released its latest results today, indicating revenue was down by at least 7%, while losses at the troubled carrier are slowing down.

The airline also announced that it was extending its revises scheduling to cope with the Boeing 737 Max grounding would be extended until the middle of July. 

To minimise the impact on its passengers, Icelandair entered into leasing agreements in April for three additional aircraft that will be in operation until the end of September. These are two 262-seat Boeing 767s and one 184-seat Boeing 757-200. With these changes, capacity during the period is around 2% less than it would be with the 737 max aircraft flying, it will help to minimize the impact on passengers.

The financial impact of the suspension of the Boeing 737 Max aircraft on the carrier is so far uncertain because it has not found out how much compensation Boeing will be paying out.

Key highlights
Total revenues USD 248.6 million, down by 7% between years
EBITDA negative by USD 14.7 million, improving by 19% between years
Excluding the impact of IFRS 16, EBITDA was negative by USD 29.3 million
13% increase in number of passengers to Iceland
Equity ratio at end of March 23%, as compared to 32% at year-end 2018
Equity ratio excluding IFRS 16 is 28%
Cash amounted to USD 289 million at end of March

Bogi Nils Bogason, President & CEO, "The number of passengers to Iceland grew by 13%, passenger numbers on the home market from Iceland grew by 10% while passenger numbers between Europe and North America declined by 2%. Our operations in the first quarter proved challenging, as we had anticipated, and operating results were in line with expectations. Air fare development was negatively impacted by tough competition of air carriers that have been offering unsustainable air fares. At the same time, the downward pressure on transatlantic air fares continued. Implementation and training expenses relating to six new aircraft, which the Company had intended to take into use had a negative impact, and, in addition, the suspension of the B737 MAX aircraft resulted in a one-off expense.

737 Max                                  Photo Icelandair
Aviation is by nature a volatile industry and exposed to sudden changes in the market environment, changes in capital markets and unexpected events. Icelandair Group has therefore focused on ensuring financial stability at all times by maintaining a strong balance sheet. As a result of a strong financial position and the Company’s flexibility, Icelandair Group is well positioned to handle challenging circumstances, but also to seize opportunities that arise, for example as a result of changes in the competitive environment. The changes that occurred toward the end of the first quarter create opportunities for Icelandair Group for profitable organic growth. In the short term, the suspension of the B737 MAX aircraft will delay the positive impact of these changes.

The Company’s long-term prospects are favourable, and with a joint effort on the development and execution of a comprehensive strategy, the future of the Icelandic travel industry is bright. It is pleasant to have a seasoned international investor share our belief as demonstrated by PAR Capital Management’s acquisition of 11.5% share in the Company for USD 47 million, as announced last April. This investment will strengthen the Company further and reinforce its competitiveness for the future.”