Friday, 2 August 2019

Icelandair reports improved results despite the 737 Max groundings

Icelandair has reported its latest results this week which showed the travel firm had seen an improvement in its operations, despite the absence of the 737 max aircraft which are still grounded following the two fatal crashes of the type.

Bogi Nils Bogason, President & CEO said, “The MAX aircraft were intended to cover 27% of Icelandair’s passenger capacity in 2019. For this reason, the position in which the Company now finds itself as a result of the suspension of the MAX aircraft is without any precedent and has a significant impact on the operations and performance of the Company. In these circumstances, our key focus has been on minimising the impact of the suspension on the Company, our passengers and the Icelandic tourism industry by adding leased aircraft to our fleet during the summer. 

We have also placed emphasis on ensuring seating capacity to and from Iceland, with the result that the number of Icelandair’s passengers travelling to Iceland has increased by 39% in the second quarter compared to the same period last year. Despite these mitigating measures, which have prevented major cancellations of flights, the situation has caused considerable disruptions in our flight schedule and our operations. This has, in turn, impacted our passengers and presented us with complex challenges. Our employees have done an outstanding job under very difficult circumstances during the peak season, where they have joined forces to resolve matters for our passengers as successfully as possible."

Bogi Nils Bogason continued, "The objective of the Company remains clear – to improve the profitability and operations of the Company. We have taken a number of measures over the recent months that are already beginning to return results. The Company’s performance, if the estimated impact quantified to date of suspension of the MAX aircraft is excluded, has improved between years, with EBIT positive by USD 25.9 million, up by USD 45.7 million from the preceding year.

Furthermore, an experienced international investor, PAR Capital Management, joined the Company’s shareholder base in April and, in addition, we signed an agreement on the sale of Icelandair Hotels and related real estate in July. Both of these developments will strengthen Icelandair's position further and provides an important confirmation of the favourable outlook for the Company and future opportunities in Icelandic tourism.”

Total revenue amounted to USD 402.8 million in the second quarter, up by 1% between years.EBIT was negative by USD 24.1 million, down by USD 4.3 million from the preceding year.EBIT was positive by USD 25.9 million without the estimated impact quantified to date of MAX aircraft suspension, up by USD 45.7 million from the preceding year.Icelandair transported 39% more passengers to Iceland in the second quarter compared to the same period in 2018.Equity ratio at the end of June was 25% compared to 28% at year-end 2018 based on the same accounting principles. Net of impact of IFRS 16 the equity ratio was 31%.Cash and cash equivalents amounted to USD 175.0 million at the end of the quarter.Day-to-day operations in the second quarter were marked by the suspension of the MAX aircraft, with the estimated negative impact quantified to date in the quarter at around USD 50 million.EBIT guidance for 2019, net of the MAX suspension, is positive of USD 50-70 million. Taking the estimated impact quantified to date of the MAX suspension into account, the EBIT guidance for the year is negative of USD 70-90 million.Share capital increase of 625.000.000 at nominal value took place in the second quarter in relation to the purchase of 11.5% of issued shares by PAR Capital Management for USD 47 million.

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