Friday, 18 March 2022

$22.5 million net loss last year, yet Icelandic budget airline PLAY anticipates operating profit in the second half of this year

Despite the challenging business environment, the budget Icelandic up-start airline PLAY anticipates the latter half of 2022 to give it an operating profit. 

As the carrier's transatlantic hub-and-spoke route network becomes fully operational PLAY believes it can turn around from a net loss of $22.5 million last you to a positive result this year. 

The financial results for 2021 were in line with the fact that PLAY is still in its build-up phase and as such was not expected to be profitable in the first year of operation, having only begun operations in June. The impact of COVID-19 also slowed the growth trajectory and lowered revenues and load factor for the year. This trend has now been reversed, utilization is growing and the outlook is positive for this year as the markets release the significant pent-up demand for travel built up over the last two years of travel restrictions.   

As the negative impact of the COVID-19 pandemic recedes the effects of the Russian invasion of Ukraine are a new challenge and the impact on PLAY has so far been limited to the increase of the price of oil. PLAY estimates that based on the current market situation, this war-related price increase will raise its costs by around 10 million USD this year. This cost will be met with an even stronger emphasis on lowering operating costs as well as the introduction of a fuel surcharge, similar to what many of PLAY‘s competitors already have in place. 

Currently, PLAY does not have any plans to raise additional funds as its cash position is solid, the company has no interest-bearing debt and the booking flow is strong and growing.

PLAY was in the process of implementing an oil price hedging strategy when the invasion took place causing the price of oil to increase and then fluctuate significantly. As future market developments are very unclear, and markets are reacting to possibly short-term but extreme external factors PLAY will not implement its hedging strategy until the visibility in the market increases. PLAY will however strengthen its efforts to reduce costs across its operation to ensure that the impact of fluctuating oil prices on cash flow and margins will be kept at a minimum.

The last quarter was an eventful one for PLAY. Ticket sales for U.S. flights were launched in December which was a significant milestone and opened a new chapter in PLAY’s expansion. PLAY had approx. 150 employees at year-end but estimates to grow to around 300 people in the summer of 2022, when PLAY will operate six aircraft in its transatlantic network connecting Europe to the USA via the PLAY home base in Iceland.

“2021 was a year of many great milestones and victories for PLAY. We began our flight operations, listed on the Nasdaq First North stock market, and enjoyed a very warm reception from passengers and investors alike, thereby showing the clear need for a new Icelandic low-cost airline. The year was of course impacted by wave after wave of COVID-19 but we were able to use our flexibility to minimize the negative impact as much as possible and are absolutely on track to realizing our vision of building PLAY into a profitable airline operating a hub-and-spoke transatlantic network. Our booking flow is strong, our new destinations have been very well received and I believe that we are expanding our network and operation at precisely the right time as the demand in the market increases. Our secret weapon is our super professional and ambitious team of people across all functions of the company, a team that is focused on working together to achieve its goals and having fun at the same time. We are entering a new and exciting chapter in the PLAY saga, and I look forward to working towards the future together with the amazing team of the people at PLAY,” says Birgir Jónsson, PLAY’s CEO.     







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