Tuesday, 5 May 2020

Net loss of USD $240.2 million for Icelandair during the first two months of 2020

Strong start of the year overshadowed by COVID-19

The national airline of Iceland has released details of its performance in the first two months of this year which show Icelandair had a net loss of USD $240.2 million!
Continued EBIT improvement year over year in January and February of USD 21.5 million
The COVID-19 pandemic and multiple travel restrictions had a significant impact on revenue and earnings in March
COVID-19-related one-off cost in the quarter amounted to USD 181.0 million
EBIT negative by USD 208.5 million, down by USD 148.9 million
Net loss of USD 240.2 million
Equity amounted to USD 191.2 million at the end of the quarter. Equity ratio, excluding Icelandair Hotels, was 18%
Total liquidity of USD 281.0 million at the end of March 2020
Focus on measures in response to the COVID-19 pandemic to strengthen the Company’s financial position and liquidity to ensure its long-term prospects and viability
Bogi Nils Bogason, President and CEO said: “The financial results of the first two months of the year were in line with expectations, improving significantly between years, where the focus on improving the profitability of our route network kept on materializing as in previous months. However, the results in March were significantly below expectations due to the impact of the COVID-19 pandemic on our operations from early March onwards. We are facing considerable uncertainty for the future and have had to take difficult but necessary measures to respond to the situation and prepare the Company for an extended period of limited operations. At the same time, we are focusing on strengthening the long-term competitiveness of the Company by financial restructuring and preparing for the issuance of new shares.

I am convinced that there will be ample opportunities for Iceland as a tourist destination and as a connecting hub between Europe and North America when these unprecedented circumstances have passed. By securing a competitive long-term capital structure of the Company and using the flexibility of the Icelandair route network that we have built up over the decades, we will be in a strong position to scale up quickly as soon as markets open again. Our efforts will be essential to drive the recovery of the Icelandic tourism industry and thereby the Icelandic economy.”

More details

Icelandair Boeing 737 MAX                                                                         Photo Boeing / Icelandair

Boeing 737 MAX update.

In 2013, Icelandair Group and Boeing signed an agreement for the purchase of sixteen Boeing 737 MAX8 and MAX9 aircraft with an option to purchase additional eight aircraft. Icelandair has already taken delivery of six aircraft which have been grounded since March 2019. Further three aircraft were supposed to be delivered in the first half of 2019 and five aircraft in Q1 2020. None of these aircraft has been delivered to date. 

Currently, it is uncertain when the MAX aircraft will return to service and when deliveries will take place. The MAX production line is currently halted and it’s uncertain when production will start again. Due to this uncertainty, Icelandair expensed USD 12.5 million in financing cost of pre-delivery payments (PDPs) in Q1 2020 which is accumulated financing cost of these undelivered MAX aircraft which would have been capitalized as part of the purchase price at the time of delivery under normal circumstances. Pre-delivery payments (PDPs) amounting to USD 12.7 million which the Company has paid to Boeing are classified as trade and other receivables.
Icelandair Boeing 737 MAX                                                                         Photo Boeing / Icelandair

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