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.

Air Iceland Connect to be absorbed into Icelandair

In another cost-cutting exercise, the Icelandair Group has decided to integrate the operations of its domestic and regional airline Air Iceland Connect into the normal operations of Icelandair. 

Air Iceland Connect operates domestic flights in Iceland and scheduled flights to Greenland. All supporting functions, such as sales, marketing, operations, finance, HR and IT will be integrated into Icelandair’s operations. The firm has remained silent on the number of job losses the integration will cause, however it is understood that at least 53 positions will be lost in the short term.

The Air Operators Certificate (AOC) of Air Iceland Connect, however, will remain separate, and its crew members will remain employed by the company. 

The role of Managing Director will be discontinued. Arni Gunnarsson, Managing Director of Air Iceland Connect, will become Managing Director of Icelandair Group’s subsidiary, Iceland Travel, replacing Bjorn Viglundsson who has served as Managing Director since June 2019. Arni joined Air Iceland Connect in 1999 as Sales & Marketing Manager and has served as Managing Director since 2005. 

More reorganisation for Icelandair's Air Iceland Connect

The cost-cutting and reorganisation work at the Icelandair Group HQ continues at pace with the latest development seeing the group's regional division, Air Iceland Connect, cut many routes including those to the UK.

Air Iceland Connect is a relatively small operation with a fleet of 3 Bombardier Q400s turboprops and 3 of the smaller Dash 8-200s aircraft which are used on both domestic and regional routes. The company says it has been challenging to operate in the regional market and has had to cut routes for efficiency reasons as the group struggles to make ends meet and stem losses.

It has withdrawn services to its UK destinations of Aberdeen and Belfast, cut some domestic Q400 services and may drop its flights to the Faroe Islands. 

Air Iceland Connect will now be used mainly for domestic flights and those to neighbouring Greenland and the group advises there will be further work to integrate Air Iceland Connect more fully into the main operation of Icelandair. 

Meanwhile, the group has been busy buying back a number of its shares in a bid to stop the share price from falling further and prevent further dilution of the company.