20 April, 2020

Icelandair restructuring taking onger than expected.

As previously announced, the Icelandair Group has been working hard with banks, investors and its advisors in an effort to strengthen the future capital structure of the company following the adverse effects caused by the coronavirus COVID-19 crisis.
Photo Icelandair

The number of flights has reduced to less than 10% of the proposed schedule for this period of the year although Icelandair, with the support of the government, has continued to keep essential air routes open to passengers and cargo during recent weeks. 

Moving forward, there is still considerable uncertainty as to when global travel restrictions will be lifted and when demand for air travel will return to pre-COVID levels. Therefore, the Company is preparing to be able to withstand an extended period of minimal revenue. At the same time, preserving the flexibility and the ability to be able to respond quickly to changes in the market as soon as the market starts showing signs of recovery.

The focus of the Company is to improve the liquidity and equity position as well as securing its long-term profitability. To achieve this, the Company is preparing to issue new shares. The prerequisite for the share offering is to ensure the Company’s long-term competitiveness. As a part of that, successful negotiations with the unions are essential as well as the approval of a shareholders’ meeting. Discussions are also ongoing or being initiated, with other key stakeholders, such as lenders, lessors and suppliers to strengthen the long-term competitiveness of the Company even further. Icelandair Group has also been in close contact with the Icelandic Government during the process.

Icelandair had been struggling for months prior to the current crisis,  it had embarked on a massive cost-cutting programme, that saw the axing of many routes, job roles being cut or shared, sale of Icelandair Hotels to Berjaya and even more recently the announcement of the forthcoming merging of the domestic and regional operation Air Iceland Connect into Icelandair. Previous its future looked secure, yet as it goes below its minimum liquidity level of USD$200 million that future is looking less and less certain. Hopefully, the restructuring can be done rapidly, or the aviation industry in Iceland will look very much different from the end of May onwards.  

Air Iceland Connect to be folded into Icelandair                               Photo Air Iceland Connect 

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