Record growth of tourism
Icelandair Group has for the past decade been at the forefront of transforming Iceland into a year-round destination and our focus on steadily expanding our route network over the years has been key to enhancing Iceland’s position as an international connecting hub. During this time, we have also strengthened our cargo business, our leasing and consulting services, our regional flight operation, as well as built up high-quality hospitality services across the country through Icelandair Hotels.
The incredible growth of the tourism industry in Iceland has created significant value for the Icelandic economy and now accounts for 39% of total export, 14% of the entire workforce in Iceland and contributes 8,6% to economic growth (GDP). The travel industry contributes around ISK 65 billion to the economy in the form of tax revenue, about three times more than it did ten years ago. A decade ago, the number of tourists visiting Iceland was around 500 thousand, but in 2019 we received 2 million tourists and the total number of passengers that travelled through Keflavik airport were 7 million.
Value over volume
We can be proud of what we have achieved as a country over the past decade. However, in the long run, such rapid growth is neither realistic nor sustainable. The value and quality of the tourism industry will not be measured solely by the number of tourists. We should be focusing on profitability and value creation, and at the same time ensure sustainability and respect for the environment. For a number of years, this has been the focus of Icelandair Group and continues to be the core of the Company’s new strategy that is currently being implemented. It is therefore pleasant to see that the new policy framework presented by the Icelandic Minister of Tourism in 2019 is also in line with this strategy. I believe Iceland is well equipped to become a leader in high-value and sustainable tourism and Icelandair Group will continue its contribution to this development.
Although there was a slight decline in the total number of tourists in Iceland in 2019, Icelandair transported 25% more passengers to Iceland than in 2018. Interestingly, we are already seeing a positive trend with the expenditure of foreign tourists increasing in 2019 and that many of them stayed longer than in the previous year, according to numbers from Statistics Iceland. In other words, the Icelandic tourist market is showing important signs towards a more sustainable future.
Shift of focus to aviation
At our Annual General Meeting in 2019, we introduced our new vision and strategy for the future. We will always be closely connected with the tourism industry in Iceland, but after a decade of direct involvement and significant investments, we decided to shift our focus back to our roots, aviation. In line with this, we are currently divesting our hotel operations and introduced a new Company structure in 2019 to support this new strategy.
As mentioned before, aviation is one of the main foundations for progress and quality of life in Iceland. Now that tourism has established itself as a stable and growing industry in Iceland, Icelandair Group will focus on operating an international airline, with a strong customer focus, efficient operations and working towards sustainable, profitable growth. Furthermore, we are committed to maintaining a passionate and performance-driven culture and becoming an industry leader in responsibility.
Icelandair Group benefits from having the backing of a broad shareholder base, with 3,171 shareholders at the end of 2019. A new shareholder, PAR Capital, joined Icelandair Group's shareholders’ group in 2019 and is now the largest shareholder. We welcome PAR Capital and value the experience and industry knowledge that PAR brings to the Company.
No dividends were paid out to shareholders for 2018 and Icelandair Group’s Board of Directors proposes that no dividends will be paid out to shareholders for the year 2019.
We have experienced various challenges during the course of our over 80 years of operation. We understand the forces of nature, have gone through economic downturns, epidemics and other challenges that have affected our operations and the airline industry.
Today we are also facing several short-term challenges. The suspension of the MAX aircraft has been ongoing since March 2019 and we are experiencing considerable uncertainty on how the COVID-19 virus will affect travels and airline operations in the near future.
Looking to the future
The operating environment will remain challenging in 2020. However, one of the key strengths of Icelandair Group is the flexibility of our route network that allows us to capitalise upon opportunities that arise and adjust unprofitable capacity if needed. The Company stands on solid foundations, its financial position is sound, and we benefit from the vast experience, expertise and spirit of our employees.
Despite short-term challenges, it is important to never lose focus on the future. Our key goal is to build a solid Company and achieve sustainable profitable growth for the future. However, it is equally important for Icelandic authorities to ensure the competitiveness of Iceland as a modern tourist destination with good infrastructure and ensuring a business environment that allows travel and tourism companies to flourish.
Airline's operations are structured in such a way that they can cope with temporary setbacks or difficulties. I believe we are well equipped to deal with any short-term challenges that we are facing. At the same time we have a focused strategy for the future which is in the capable hands of our strong management team that is ready to deliver a sustainable and profitable long-term business.