Financial review

Striving for excellence in all operations


Key figures table

USD thousands 2019 2018 2017 2016 2015
Operating results
Total income 1,504,495 1,510,518 1,417,987 1,285,574 1,139,699
EBIT -39,297 -56,968 49,645 118,437 142,840
EBT -72,601 -67,810 48,642 120,111 140,223
Loss/profit for the period -57,779 -55,570 37,538 89,068 111,223
Balance sheet
Total assets 1,676,587 1,464,122 1,423,842 1,292,493 971,979
Total equity 482,478 471,379 596,545 568,213 456,531
Interest bearing debt (excl. IFRS16) 387,384 451,445 289,541 242,382 65,530
Net interest bearing debt (excl. IFRS16) 140,824 147,951 64,263 -7,743 -148,589
Cash flow
Net cash from operating activities 119,878 61,553 205,603 209,024 245,136
Net cash used in investing activities -138,657 -129,933 -228,419 -291,759 -219,942
Net cash used in/from financing activities -44,940 149,336 14,554 113,643 -14,320
Cash and cash equivalents end of period 235,073 299,460 221,191 226,889 194,586
Key ratios
Earnings per share in US Cent per share -1.06 -1.16 0.75 1.79 2.24
Intrinsic value 10.92 12.07 15.09 13.99 11.24
Equity ratio 29% 32% 42% 44% 47%
Current ratio 0.86 0.71 0.99 0.92 0.8
Capex USD thousand 269,274 271,251 166,131 243,397 210,400
Tranport revenue as % of total revenues 77% 72% 74% 74% 74%
EBIT ratio -3% -4% 4% 9% 13%

To achieve excellence in all aspects of operations, every contribution matters. For that to happen, me and my team at KEF ground handling need to be resourceful in order to reach every single one of our employees and help them understand how their contribution is important towards achieving that level of excellence.

Guðmundur Ólafsson

Director, KEF Ground Handling

Shareholder information and IR

Since December 2006 Icelandair Group’s shares have been listed on NASDAQ Iceland under the symbol ICEAIR. It is our objective to ensure that timely and correct information about Icelandair Group is made available to all interested parties simultaneously, regularly and consistenly. Icelandair’s share price stood at ISK 7.55 at the end of 2019.

Share capital

Icelandair Group’s share capital amounts to ISK 5,437,660,653 at 31 December 2019. Shareholders are entitled to receive dividends as declared from time to time and are entitled to one vote per share of one ISK. In accordance with a decision at Icelandair Group‘s Annual General Meeting on 8 March 2019, the Company‘s share capital was reduced by ISK 187,339,347 of nominal value as of 1 April 2019 and own shares in the same amount were cancelled. As a result of a Shareholders‘ Meeting on 24 April 2019, the Company‘s share capital was raised by 625,000,000 shares by issuance of new shares. These new shares were purchased by PAR Capital Management for USD 46 million. Icelandair Group held no treasury shares at year-end 2019.

Share performance

Icelandair Group’s shares stood at ISK 9.58 at the beginning of 2019. The shares reached a high of ISK 11.10 at 11 June 2019. Over the year, Icelandair Group’s share price decreased by 21%.

Icelandair Group shareprice and trading volume in 2019

All amounts in ISK 2019 2018 2017 2016 2015
Market capitalisation million 41,057 47,900 73,550 115.500 177,000
Share price at year end 7.55 9.58 14.71 23.10 35.40
Highest closing price 11.10 16.55 23.53 38.90 35.40
Lowest closing price 5.50 6.53 13.13 22.95 20.95
No. of issued shares million 5,438 5,000 5,000 5,000 5,000
No. of outstanding shares million 5,438 4,813 4,861 4,975 4,975
Average no. of outstanding shares million 5,244 4,822 4,887 4,975 4,975

PAR Capital becomes Icelandair's single largest shareholder

“In April, a new shareholder, PAR Capital, joined Icelandair Group’s shareholder base and is now the largest shareholder. PAR Capital holds shares in many other airline and tourism companies, has considerable experience in this area and has achieved good results with its investments over the years. It is important for Icelandair Group that PAR Capital shares our vision of the strengths and future potential of the business model of our Company.” -Bogi Nils Bogason, President and CEO of Icelandair Group


Share liquidity

Icelandair Group has agreement with Landsbankinn hf. and Islandsbanki hf. regarding market-making for the issued shares of Icelandair Group. The agreement is of unspecified duration and may be terminated with one month's notice. The purpose of the agreement is to improve liquidity and to enhance transparent price formation for the Company’s shares on NASDAQ Iceland.

Shares in Icelandair Group were traded 7,428 times in 2019 (2018: 7,204 times) for a total market value of ISK 32.8 billion (ISK 57.2 billion in 2018). The average number of shares traded was 15.6 million. Icelandair Group’s market capitalisation at the end of 2019 was ISK 41.1 billion.

Key ratios

Icelandair Group reported net shareholder loss of USD 57.8 million in 2019, corresponding to -1.06 US cents per share. The Company’s total equity at year-end was USD 482.5 million.

2019 2018 2017 2016 2015
Earnings per share in US Cent -1.1 -1.2 0.8 1.8 2.2
Intrinsic value of share capital 10.9 12.0 15.0 14.0 11.2
P/E ratio -5.9 -7.1 18.4 11.4 12.1
P/B ratio 0.7 0.8 1.0 1.6 2.4
Number of shareholders 3,171 3,017 2,394 2,560 2,387


At the end of 2019, the number of shareholders was 3,171, as compared to 3,017 at the beginning of the year. Of the total shareholder base, 0.3% held 63.7% of the shares in the Company.

Number of shares Shareholders % Shares %
1 - 100,000 2,118 66.8% 57,084,198 1.0%
100,001 - 1,000,000 849 26.8% 283,236,307 5.2%
1,000,001 - 10,000,000 160 5.0% 429,935,436 7.9%
10,000,001 - 100,000,000 34 1.1% 1,202,714,830 22.1%
100,000,001 + 10 0.3% 3,464,689,882 63.7%
Total 3,171 100.0% 5,437,660,653 100.0%

20 Largest shareholders 31 December 2019

Name No. Shares Shares in %
Par Investment Partners L.P. 745,250,000 13.71
The Pension Fund of Commerce 642,361,239 11.81
Gildi Pension Fund 393,761,301 7.24
Birta Pension Fund 381,561,804 7.02
The Pension Fund for State Employees. Division-A 329,300,000 6.06
Stefnir IS 15 – Icelandic Professional Investors Fund 293,374,113 5.40
Stefnir IS 5 – Icelandic Professional Investors Fund 280,563,903 5.16
Frjalsi Pension Fund 154,480,294 2.84
Landsbref – Urvalsbref – Icelandic Professional Investors Fund 134,522,728 2.47
The Pension Fund for State Employees. Division-B 109,514,500 2.01
Bru Pension Fund of Municipality 96,136,406 1.77
Solvollur ehf. 91,213,900 1.68
Stapi Pension Fund 87,311,929 1.61
Stefnir – Icelandic Professional Investors Fund 85,000,000 1.56
General Pension Fund 83,378,324 1.53
Arion bank 72,724,000 1.34
Individual 53,761,924 0.99
Vaenting ehf. 50,000,000 0.92
Collection Fund of Pension Rights (Pension Fund) 46,411,657 0.85
Festa Pension Fund 46,411,657 0.01
Other 1,260,620,974 24.03
Total 5,437,660,653 100.00

Dividend and dividend policy

Icelandair Group’s goal is to pay 20-40% of each year’s net profit in dividends. Final annual dividend payments will be based on the financial position of the Company, operating capital requirements and market conditions. Icelandair Group’s Board of Directors proposes that no dividends will be paid out to shareholders for the year 2019.

Investor relations

Icelandair Group’s objective is to ensure that timely and correct information about the Company is made available to all stakeholders simultaneously, regularly and consistently. All press releases, financial disclosures and Company announcements are published through GlobeNewswire, a NASDAQ company. Icelandair Group strives continuously to improve the quality, transparency and consistency of its information disclosures.

The investors’ website at provides extensive news and background information on Icelandair Group for both analysts and investors. The site contains archived regulatory announcements, financial reports and presentations, shareholder information, share price information, dividend policy and the financial calendar.

Financial calendar

Financial statement Q1 2020

week 18, 2020

Financial statement Q2 2020

week 31, 2020

Financial statement Q3 2020

week 44, 2020

Financial statement Q4 2020

week 06, 2021


week 11, 2021


Performance in 2019

The year 2019 was challenging, as the suspension of the MAX aircraft had an unprecedented negative impact on Icelandair Group‘s operations, resulting in lost revenue, increased expenses and restricted utilisation of the Company’s fleet and crew. Total operating income was USD 1.5 billion, down by 0.4% between years. EBIT improved by USD 17.7 million from 2018, amounting to USD -39.3 million. Net loss amounted to USD 57.8 million, as compared to net loss of USD 55.6 million in 2018.

Loan agreement with CIT Bank

In December Icelandair Group entered into a secured USD 35 million loan agreement with CIT Bank, which is part of refinancing due to the redemption of bonds issued by the Company earlier this year. The maturity date of the loan will be based on a five-year term.


Transport figures

Icelandair has never carried more passengers on international flights than in 2019. The total number of passengers was over 4.4 million, a 6% increase. The load factor in 2019 was 82.0%. The number of Icelandair’s passengers to Iceland increased by 25%, amounting to almost 1.9 million. The number of passengers from Iceland increased by 18% and the number of via passengers decreased by 9%. This increase in the to and from markets is due to the Company’s focus on minimizing the impact of the suspension of the MAX aircraft and to respond to changes in the competitive environment in these markets. On-time performance in the Icelandair’s route network in 2019 improved year-on-year, increasing to 74.0% from 62.4%. This was achieved as a result of a number of measures taken to improve on-time performance despite the impact of the suspension of the MAX aircraft on the flight schedule.

The total number of passengers on domestic and regional flights was around 282 thousand, decreasing by 12%. Sold block hours on charter flights decreased by 11% and freight was up by 6%. The number of sold room nights at Icelandair Hotels for the full year was up 5% and room occupancy was 79.9% compared with 80.1% in 2018.

2019 2018 % Chg.
International flights
Number of Passengers Thousand 4,408 4,141 6%
Load Factor (LF) % 82.0 81.0 1.0 ppt
Available Seat KM (ASK) Million 16,679 16,240 3%
Revenue Passenger Kilometers (RPK) Million 13,673 13,154 4%
On time performance Number 74.0 62.4 11.6 ppt
Regional and Greenland flights
Number of Passengers Thousand 282 319 -12%
Load Factor (LF) % 70.5 65.4 5.0 ppt
Available Seat KM (ASK) Million 143 181 -21%
Charter flights
Sold Block Hours Number 30,118 33,670 -11%
Freight Tonne KM (FTK) Thousand 132,989 125,758 6%
Available Hotel Room Nights Number 436,799 413,362 6%
Sold Hotel Room Nights Number 349,176 331,059 5%
Occupancy of Hotel Rooms % 79.9 80.1 -0.2 ppt

Traffic figures


The estimated effect on Icelandair Group's results quantified to date was around USD 100 million in 2019 at EBIT level, net of the partial compensation agreements that were reached with Boeing during the year. The partial compensation was recognised partially as increased passenger revenue and partially as decreased aircraft lease expenses in aviation expenses. Discussions with Boeing are ongoing regarding further compensation for the financial loss resulting from the suspension.

Net loss amounted to USD 57.8 million in 2019 compared to a loss of USD 55.6 million in 2018. EBIT improved between years and was negative of USD 39.2 million compared to negative EBIT of USD 57.0 million in 2018. The year 2019 was challenging, as the suspension of the MAX aircraft had an unprecedented negative impact on Icelandair Group‘s operations, resulting in lost revenue, increased expenses and restricted utilisation of the Company’s fleet and crew. With focus on improving the operations during the year and increasing the profitability of the route network, considerable operational improvements were achieved in the Company’s underlying business. In addition, the flexibility and strength of Icelandair route network was clearly demonstrated when the Company managed to efficiently realign the route network to the changes in the market and increasing the number of passengers to Iceland by 25%, despite the MAX suspension. This allowed the Company to meet increased demand and ensure seat capacity to and from Iceland and thereby support the Icelandic tourist market.

Earnings development 2019 2018 Change
Total revenue USDk 1,504,495 1,510,518 -6,023
Total operating cost excl. depreciation USDk 1,366,519 1,434,039 -67,520
EBIT USDk -39,297 -56,968 17,671
EBT USDk -72,601 -67,810 -4,791
Net loss USDk -57,779 -55,570 -2,209
EBIT ratio % -2.6 -3.8 1.2 ppt

EBIT and profit/loss in USD millions 2015-2019

EBIT % 2015-2019

Change in financial reporting standards

At the beginning of 2019 Icelandair Group adopted a new financial reporting standard, IFRS 16. The standard introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the lessee accounting by removing the distinction between operating lease and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets.



Transport revenue up by 6%

Transport revenue totalled USD 1,159.5 million, up by 6% between years. Of this figure, passenger revenues amounted to USD 1,004.5 million. Passenger revenue increased by 6%. Due to the Company‘s focus on minimizing the impact of the suspension of the MAX aircraft and to respond to changes in the competitive environment, Icelandair shifted its focus in the route network and the sales and marketing activities, which resulted in a changed composition of the passengers. Revenue from the VIA market decreased considerably in 2019 as a result of the change in the passenger mix, but was offset by revenue growth from the TO market, where passenger numbers increased significantly. Revenue from the FROM market also increased. Interim compensation received from Boeing was recognised partially in the Company’s accounts as passenger revenues.

Other revenues decreasing between years

Revenue from aircraft and aircrew lease decreased from USD 120.1 million in 2018 to USD 91.6 million in 2019, primarily as a result of a decline in the number of agreements on leasing assignments, but also because the implementation of IFRS 16 negatively affected this revenue category by USD 7.2 million. Other revenue totalled USD 253.3 million in 2019, down from USD 297.1 million from the preceding year. Revenues from tourism account for the largest share, decreasing by US 29.3 million as a result of reduced sales of package tours by Iceland Travel.

Total income in USD thousand 2015-2019

USD thousand 2019 2018 Change % Change % of rev. '19
Transport revenue: 1,159,524 1,093,314 66,210 6% 77%
Passengers and ancillary 1,101,088 1,034,956 66,132 6% 73%
Cargo and mail 58,437 58,358 79 0% 4%
Aircraft and aircrew lease 91,647 120,113 -28,466 -24% 6%
Other operation revenue 253,324 297,091 -43,767 -15% 17%
Total 1,504,495 1,510,518 -6,023 -0.4% 100%


Operating expenses amounted to USD 1,366.5 million in 2019, down by 5% between years.

USD thousand 2019 2018 Change % Change % of exp. ´19
Salaries and other personnel expenses 489,828 515,872 -26,044 -5% 36%
Aircraft fuel 323,518 298,771 24,747 8% 24%
Aircraft lease 32,174 36,532 -4,358 -12% 2%
Aircraft maintenance expenses 79,178 80,923 -1,745 -2% 6%
Aircraft handling, landing and communication 133,585 136,443 -2,858 -2% 10%
Other operating expenses 308,236 365,498 -57,262 -16% 23%
Total 1,366,519 1,434,039 -67,520 -5% 100%

Salaries and personnel expenses decreased by 5% between years

Salaries and other personnel expenses amounted to USD 489.9 million, decreasing by USD 26.0 million, or 5%, from 2018. The main reason for the decrease is the weakening of the ISK against the USD over the comparison period, as most of the Company’s wage costs are in ISK.

Aviation cost increasing due to MAX aircraft suspension

The suspension of the MAX aircraft had an unprecedented negative impact on Icelandair Group‘s operations as the aircraft was intended to to cover 27% of Icelandair’s passenger capacity in 2019. Aviation cost totalled USD 568.5 million in 2019 and increased by 3% from 2018. Fuel cost amounted to USD 323.5 million up by 8%. The Company's price of fuel in 2019, taking hedging into account, was on average USD 658/ton, which corresponds to an 7% increase. Aircraft lease amounted to USD 32.2 million, a one-off expenditure resulting from the lease of aircraft and crew due to the MAX suspension. Part of the interim compensation agreement with Boeing was recognised as decreased aircraft lease expenses. Aircraft handling, landing and communication expenses increased in line with the Company’s increased scope of operation. In addition, the leased aircraft are less efficient as regards these items than the MAX aircraft. Maintenance expenses totalled USD 79.2 million compared to USD 80.9 million in 2018.

Other operating expenses decreased by 16%

Other operating expenses amounted to USD 308.2 million compared to USD 365.5 million in 2018. Savings from improvement initiatives are reflected in lower communication and advertising expenses. Improved on-time performance decreased expenses related to customer services by 7%. Tourist expenses decreased by 40% between years due to reduced purchased services in tourism owing to changes in demand. This is reflected in the reduced income from tourism. Operating cost of real estate totalled USD 17.5 million and decreased from USD 37.6 million in 2018 due to the implementation of IFRS 16.

Depreciation and amortisation amounted to USD 177.3 million

Total depreciation of operating assets amounted to USD 143.9 million in 2019, as compared to USD 129.8 million in 2018. Depreciation of right-of-use assets amounted to USD 28.9 million. Amortisation of intangible assets totalled USD 4.5 million, up by USD 0.8 million from 2018.

Net financial expenses negatively affected by implementation of IFRS 16

Net finance expenses totalled USD 26.0 million in 2019, as compared to USD 12.6 million in 2018. The interest expenses, amounted to USD 20.5 million in 2019, as compared to USD 21.2 million in 2018. Interest income totalled USD 2.2 million, down from USD 2.9 million in the preceding year. The currency exchange gain resulting from the position of financial assets and liabilities at the end of the year totalled USD 3.9 million, as compared to USD 5.7 million in 2018. Net interest expenses on lease receivables totalled USD 12.3 million.

Total expenses before deprecation as % of total income 2015-2019


Financial Position

Icelandair Group’s financial position is strong. Assets at year end amounted to USD 1.7 billion. Implementation of IFRS 16 increased assets by USD 280.0 million. Capital expenditures totalled USD 269.3 million in 2019. Net interest-bearing liabilities amounted to USD 140.8 million and total liquidity amounted to USD 301.6 million. The equity ratio at year end was 29%.

Balance sheet

Total assets USD 1.7 billion

Total assets amounted to USD 1.7 billion, up by USD 212.5 million from the turn of the year. USD 280.0 million of the increase resulted from the implementation of IFRS 16. Rights of use of non-current assets amounted to USD 134.0 million, for the largest part relating to the right of use of aircraft, i.e. USD 124.0 million. Rights of use of assets held for sale amounted to USD 145.9 million.

In the balance sheet, assets and liabilities pertaining to Icelandair Hotels and Iceland Travel are shown as assets held for sale. The sale of a 75% equity share in Icelandair Hotels is expected to be completed by 31 May 2020.

Equity ratio 29% at year-end 2019

Equity amounted to USD 482.5 million as at 31 December 2019, up by USD 11.1 million from the beginning of the year. Total comprehensive loss amounted to 34.8 million. The net loss was USD 57.8 million. Other comprehensive income totalled 22.9 million, mainly due to positive cash flow hedges. Translation differences were negative of USD 1.3 million and net loss on hedge of investment net of tax was USD 2.2 million.

In accordance with authorisation approved at the Company’s Annual General Meeting held on 8 March 2019, the Company’s share capital was reduced, with effect from 1 April, with the reduction corresponding to all the Company’s shares in itself, 187,339,347 shares. At a shareholders’ meeting held 24 April a proposal was approved authorising the Board of Directors to increase Company’s share capital in the nominal value of ISK 625 million with the sale of shares to PAR Capital Management Inc. and related companies. The buying price was ISK 9.03, corresponding to 11.5% of the total shares in Icelandair Group. The shares were issued on 8 May 2019. PAR Capital is an international investment fund focusing on long-term investments, mostly in travel services and airlines.

The Company’s issued share capital at the end of 2019 is 5,437,660,653 shares.

Share Capital 31 December 2018 5,000,000,000
Reduction of capital 187,339,347
Increase of share capital 625,000,000
Share Capital 31 December 2019 5,437,660,653

The equity ratio was 29%, as compared to 28% in 2018, according to same accounting standards. Excluding the impact of IFRS 16 the equity ratio would have been 36%.

USD thousands 2019 2018 2017 2016 2015
Comprehensive income -34,833 -110,427 48,477 138,650 109,419
(Loss) Profit for the year -57,779 -55,570 37,538 89,068 111,223
Equity 482,478 471,379 596,545 568,213 456,531
Equity Ratio 29% 32% 42% 44% 47%

Interest bearing debt decreased during the year

Total interest-bearing debt amounted to USD 387.4 million, down by USD 64.1 million from the beginning of the year. Net interest-bearing debt, excluding lease liabilities resulting from the IFRS 16 implementation, amounted to USD 140.8 million, down by USD 7.1 million. Lease liabilities amounted to USD 308.0 million.

USD thousand 31.12.2019 31.12.2018 Change
Loans and borrowings non-current 241,328 147,513 93,815
Loans and borrowings current 79,958 268,288 -188,330
Loans and borrowings held for sale 66,098 35,644 30,454
Total interest bearing debt 387,384 451,445 -64,061
Cash and cash equivalents 235,073 299,460 -64,387
Cash held for sale 11,487 4,034 7,453
Total net interest bearing debt 140,824 147,951 -7,127
Lease liabilities non-current 135,473 0 135,473
Lease liabilities current 22,980 0 22,980
Lease liabilities held for sale 149,554 0 149,554
Total lease liabilities 308,007 0 308,007
Total net interest bearing debt incl. liabilities 448,831 147,951 379,522

Interest-bearing and net interest bearing debt

Interest-bearing non-current debt increased by USD 93.8 million as a result of refinancing of unsecured bond classes. In the first quarter, the Company entered into a USD 80.0 million loan agreement with an Icelandic financial institution. In the fourth quarter, the Company entered into a USD 65.2 million loan agreement with CIT Bank, which was paid out in two tranches in December.

Interest-bearing current debt decreased by USD 188.3 million. The Company had two unsecured bond classes at the start of the year, which were classified as short-term. In the first half of 2019, the unsecured bond classes were paid up in full in the amount of USD 213.7 million.

Interest-bearing debt of assets held for sale increased by USD 30.5 million following a refinancing of Icelandair Hotels, which was completed in December and resulted in a USD 28 million cash inflow to Icelandair Group.

Cash Flow and Investments

USD thousand 2019 2018 Change
Net cash from operating activities 119,878 61,553 58,325
Net cash to investing activities -138,657 -129,933 -8,724
Net cash to/from financing activities -44,940 149,336 -194,276
Increase / decrease in cash and cash equivalents -63,719 80,956 -144,675
Cash and cash equivalents at 31 December 235,073 299,460 -64,387

Cash from operation activities

Investment in operation assets / long-term cost

Total liquid funds USD 301.6 million end of 2019

Cash and cash equivalents amounted to USD 235.1 million at the end of 2019. In addition, cash and cash equivalents in the amount of USD 11.5 million are classified as assets held for sale. At the end of the year, the Company had USD 55.0 million in undrawn revolving facilities. The Company’s total liquidity therefore amounted to USD 301.6 million.

Total investments in 2019 USD 269.3 million

Investments in operating assets amounted to USD 253.4 million. Of this figure, investment in aircraft and aircraft components totalled USD 165.5 million, while investment in engine overhauls on own aircraft totalled USD 65.8 million over the year. Other investments amounted to USD 22.2 million, including investments in buildings and interiors at Keflavik airport, ground handling and other equipment and the Company’s hotel business. Investments in long-term expenses amounted to USD 15.8 million, thereof deferred cost amounting to USD 10.2 million and intangible assets USD 5.7 million.


Type Icelandair Cargo Loftleiðir AIC* Fleet 31.12.19 Fleet 31.12.18 Owned Dry lease
B757-200 20 2 7 29 31 26 3
B757-300 2 2 2 2
B737 MAX 8 5 5 3 2 3
B737 MAX 9 1 1 0 1
B767-300 4 2 6 6 5 1
B737-700 1 1 1 1
B737-800 1 1 2 1
Bombardier Q200 3 3 3 3
Bombardier Q400 3 3 3 3
Total 32 2 11 6 51 51 41 10
* AIC = Air Iceland Connect

The Company made in 2012 an order for sixteen B737 MAX8 and B737 MAX9 aircraft, with an option to buy an additional eight aircraft. The commitment resulting from the confirmed orders, according to Boeing’s list prices at the date of the contract, amounted to USD 1.6 billion. The Compan, their financing that had previously been secured has now expired.y received acceptable discounts which, due to confidentiality agreements, cannot be disclosed. The order was for nine B737 MAX8 aircraft, with a seating capacity of 160 passengers, and seven B737 MAX9 aircraft, with a seating capacity of 178 passengers in Icelandair’s configuration.

The B737 MAX aircraft are a new and improved version of the B737 NG aircraft. They are fitted with new and more efficient engines, which will reduce fuel consumption by 27% per seat in comparison with the B757-200 aircraft currently used on the Company’s international routes.

In 2018 a delivery was taken of three of the B737 MAX8 aircraft. Two of the aircraft were financed by JOLCO’S (Japanese Operating Leases with Call Options) and one aircraft by sale and leaseback. In 2019, Icelandair took delivery of two Boeing 737 MAX8 and one Boeing 737 MAX9. They were all financed through sale lease back agreements.

In the second quarter of 2019, Icelandair was expected to take delivery of additional three Boeing 737 MAX aircraft, i.e. one Boeing 737 MAX8 and two Boeing 737 MAX9. However, due to the suspension of the Boeing 737 MAX which was initiated in March 2019 and still persists, the delivery dates of these aircraft and all deliveries of future aircraft is still uncertain. Icelandair has already secured financing through sale leaseback agreements of one Boeing 737 MAX8 aircraft which was to be delivered in 2019 and one Boeing 737 MAX aircraft of the 2020 delivery schedule. Due to delay in delivery of the two 737 MAX9 aircraft that were to be delivered in in 2019, their financing that had previously been secured has now expired.



The key focus in 2020 will be on the profitability of Icelandair’s route network and on mitigating the operating risk of a potential further suspension of the MAX aircraft. The emphasis will be on increasing unit revenues and improving performance. The total number of passengers is estimated 4.2 million to 26 destinations in Europe and 14 in North America.

Focus on profitability

Icelandair Group’s competitive environment has changed significantly. Airlines that used to focus primarily on growth and market share have either disappeared from the market or significantly changed their focus to an emphasis on profitability rather than growth. In 2020, Icelandair‘s emphasis will continue to be on the tourism market to Iceland. Although, the number of flights will be reduced by about 3% and available seat kilometres by 8%, and the company expects to transport at least as many passengers to Iceland this year as in 2019.

4.2 million passengers estimated in 2020

Flights will be offered to 40 destinations in 2020, 14 in North America and 26 in Europe, with Barcelona in Spain added as a new destination in the summer. The estimation is that 4.2 million passengers will be transported, using 31 aircraft in the route network. Icelandair does not expect the MAX aircraft to be operated in the company’s route network during the peak season next summer. The company has already entered into leasing agreements regarding three Boeing 737-800 aircraft, and a decision has been made to keep more Boeing 757 aircraft in operation in 2020 than originally planned. Prospects in the company’s freight operations continue to be good. Export is expected to continue to grow. Some uncertainty remains regarding import, and a slight decline is expected between years.

Unit revenue expected to increase

Revenue generation has improved following the completion of the implementation of a new revenue management system that was finalised during the year 2019 and is intended to return 2-4% higher unit revenues than the earlier system. Unprofitable capacity has been reduced, particularly on the longer North American routes, and the balance in the passenger capacity between Europe and North America has been improved with the aim of increasing unit revenues. The sales and marketing activities in North America have also been reorganised and strengthened. The company will continue to build up the new connection bank that was introduced during the high season in 2019 with the objective of improving the utilisation of the fleet and enabling the company to continue its growth at Keflavik Airport.

Less financial impact of MAX suspension in 2020

The suspension of the MAX aircraft had an unprecedented impact on the operations of Icelandair in 2019. There is still uncertainty regarding when the suspension will be lifted. However, the financial impact will be considerably less this year than in 2019, as Icelandair has been able to organise its operations in 2020 with this potential scenario in mind. Icelandair Group has reached two interim agreements with Boeing regarding compensation for Icelandair’s financial loss resulting from the MAX suspension, and continued discussions with Boeing regarding further compensation are ongoing, both regarding the 2019 and 2020 negative impact on the company’s operations.

Focus on streamlining operations

Icelandair will continue to focus on further streamlining its operations in 2020 in line with the Company’s new strategy, which emphasises operational efficiency. Various steps have been taken to improve fuel efficiency and reduce operational cost in 2020, most importantly through the implementation of a new flight planning system. The optimisation of crew requirements was impossible to achieve in the second and third quarters of 2019 due to the MAX suspension. However, improvements in crew utilisation were achieved in the fourth quarter of 2019, and further improvements are expected throughout 2020.

Continued improvements in on-time performance

Icelandair expects on-time performance to continue to improve in 2020, locking in the significant gains made in 2019 and at the same time introducing further improvement measures. Success in this area contributes to improved customer satisfaction and reduces disruption costs. In addition, there are several improvement initiatives in other areas, such as maintenance and ground handling through renegotiations with suppliers and continual improvement projects.

Various other initiatives have been undertaken to further explore and implement streamlining measures, such as potential outsourcing opportunities, a review of procurement practices, automation opportunities and simplified organisational structures. This work will continue throughout 2020 and beyond with the objective of continually improving customer service and ensuring Icelandair’s future competitiveness.


Successful turnaround of domestic flight operation

Air Iceland Connect achieved a successful turnaround of its business resulting from extensive actions taken within its operations. Evaluation of further integration of the company with Icelandair is ongoing with the aim of ensuring acceptable operational performance for the future. One Bombardier Q-400 aircraft has been dry-leased for the next five years, and work is in progress on reducing the fleet by one Bombardier Q-200.

Favourable outlook for Loftleidir Icelandic

The outlook for the Company’s leasing operations through Loftleidir Icelandic is favourable and the assignment position is good. Loftleidir Icelandic holds a 36% share in Cabo Verde Airlines. Work on long-term financing of the company is currently in progress, but if this work proves unsuccessful, it could impact the continued operations of Cabo Verde Airlines and therefore negatively impact Loftleidir Icelandic’s performance in the year.

Vita Travel Agency is profitable and the prospects for 2020 are favourable. The prospects of Iceland Travel are favourable, although poorer results are expected in 2020 than in 2019. The main reason is favourable currency trends in 2019 that are unlikely to continue into 2020.

Divestment of Icelandair Hotels

In July 2019, a share purchase agreement was signed with Berjaya Property on Berjaya’s acquisition of a majority share in Icelandair Hotels and related real estate. Following the transaction, Icelandair Group will hold a 25% equity stake for a minimum of three years. The completion of the transaction is scheduled by 31 May 2020.

Fleet strategy

Company’s long-term fleet strategy under review As stated by the Company last year, Icelandair’s current fleet strategy is under review. The uncertainty regarding the MAX suspension has delayed this work. The review is still ongoing and conclusions are expected in the next few months.

The Company is still anticipating the delivery of 10 MAX aircraft. According to the initial delivery schedule, three of the aircraft were to be delivered in 2019, five in 2020 and two in 2021. The Company expects the three MAX aircraft that were scheduled for delivery in 2019 to be delivered before the end of 2020. However, the Company realizes that the risk of further delays is increasing. The suspension has already had significant adverse effects on the Company’s operations and profitability and will continue to do so while the suspension remains in place. The Company continues to monitor the development of the situation closely and maintains rolling 12-18 month contingency plans to ensure that all possible mitigating actions are taken during this time period. Icelandair Group’s capital expenditures plan involving investments over the year assumes delivery of the three MAX aircraft that were scheduled for delivery in 2019.

2020 Financial guidance

The Company continues to operate in an uncertain environment. Measures have been taken to mitigate operational risk arising from potential continued delays of the MAX aircraft, including the leasing of extra aircraft. Icelandair is in discussions with Boeing on compensation for the financial losses regarding 2019 and 2020. It is unclear what the effect of the Corona Virus will be on demand for flights and tourist services in the near future. In addition, passenger bookings of international flights are shifting nearer departure times, which makes forecasting revenue more challenging. Furthermore, Loftleidir Icelandic results can be negatively impacted by the company’s shareholding in Cabo Verde Airlines. However, the focus for 2020 is clear – to return to profitability and build a sustainable platform for profitable growth.

Risk management

Icelandair Group’s objective in its risk management is to manage and control risk exposures and keep them within acceptable limits, subject to optimised returns, by using derivatives and other available means. All risk management is carried out within guidelines set by the Board of Directors.

Various macro-economic, sector-specific, financial and enterprise-related risks can impact Icelandair Group’s operations. The Board of Directors is responsible for defining policy measures to reduce exposure to financial and enterprise risk. These measures outline the parameters and framework that need to be considered when managing risk, especially risk arising from price volatility and liquidity fluctuations. An internal Risk Management Committee, chaired by the CEO, endeavours to reduce risk exposure to the maximum feasible extent within the Board’s policy limits. The main policy objectives determine the methods to be used to reduce costs and disadvantages arising from any instability and uncertainty in the Company’s operating environment. The policy is reviewed on a regular basis and modified when improvements are needed.

Foreign currency risk

The Group seeks to reduce its foreign exchange exposure arising from its business dealings in diverse currencies through a policy of matching receipts and payments in each individual currency to the extent possible. Any mismatch is dealt with using currency trades within the Group before turning to outside parties. Historically, the biggest currency mismatch has been a USD deficit, where the annual USD cash inflow falls short of the USD outflow, mainly due to investment, maintenance, fuel costs, and funding-related payments, which are to a large extent denominated in USD. This mismatch has since 2017 turned positive due to USD revenue growth and stronger USD inflows resulting from increased number of US destinations and US sales. In recent years an ISK deficit has emerged and expanded from being trivial to becoming a significant and growing ISK shortfall since 2009. This trend stems from the revenue growth in foreign markets, whilst the consequential added costs of operations are mainly domestic and need to be covered by ISK. This shortage is financed by a surplus of European currencies, most importantly the EUR and Scandinavian currencies, and the CAD. The Group follows a policy of hedging 50-80% of the net currency exposure 9-12 months forward. In addition to the impact on cash flow, risk exposure of this nature affects the Balance Sheet. The Risk Management Committee monitors on a monthly basis the net Balance Sheet currency mismatch and mitigates the exposure through short-term management of assets and loans to the extent feasible and within the scope of the cash flow objectives.

EUR/ISK exchange rate 2015-2019


Fuel price risk

The Group’s risk policy requires a hedge ratio between 40% and 60% 9-12 months forward and up to 20% of the estimated exposure 13-18 months forward. Account is taken of the ratio of forward ticket sales as a minimum cover if it exceeds the 40% lower band. The policy entails a mixture of swaps and options, which are allocated in accordance with the degree of risk exposure. The policy and hedge strategy also take account of several supporting factors which are eligible to counter the fuel risk exposure. These factors are acknowledged as hedge proxies and evaluated to some extent as substitutions for hedge contracts. First, contractual risk transfer is used where possible and the benefits of a correlation between jet fuel and the USD are monitored and calculated on a regular basis. Second, ticket pricing is a very important and effective tool in the medium term to offset fluctuations in fuel prices. Third, production management is a longer-term option, which can become relevant when coping with fuel price trends over longer periods. Hedge strategies are subject to IFRS hedge accounting standards, but, importantly, the embedded instrument quality requirements are aligned with policy guidelines of sufficient effectiveness, reporting clarity and transparency of scenario analysis. Thus, basis risk is avoided and hedge effectiveness sustained by choice of instruments.

Jet fuel price per tonne 2015-2019

Interest rate risk

The Group follows a policy of hedging 40-80% of the interest rate exposure of long-term financing with up to a five-year horizon. Currently, foreign loans are hedged against interest rate fluctuations using fixed-rate loan contracts or swap contracts, where the floating rate is exchanged for fixed interest rates. When evaluating the interest risk exposure and the optimal level of protection, account is taken of the Group’s level of interest-bearing cash and marketable securities and various other offsetting economic factors.

Six month USD libor 2015-2019

Carbon price risk

Since the beginning of 2012 all airlines offering European destinations have been required to comply with the EU Emissions Trading Scheme (ETS), which commits them to raise their carbon permits in proportion to their emissions of carbon. In November 2012 the EU decided to offer airlines flying to and from European destinations an exemption from the Scheme with respect to international flights. Icelandair accepted this offer and its commitment was therefore reduced to covering internal European flights (ie. “stop the clock”). Again, in April 2014, the EU extended this exemption to 2016 and then further to 2020 and has therefore relieved airlines temporarily from the uncertainty of carbon exposures within the time frame of “phase 3”. Emission permits are mainly purchased using spot and forward contracts, and carbon exposure is subject to the same scrutiny and risk management as jet fuel. Between 2012 and 2017, the consequences of ETS compliance were economically trivial in comparison with the magnitude of fuel cost volatility, and therefore the emission allowances were not embedded into the fuel hedge strategies, but instead procured on a rolling 3-6-month basis in proportion to fuel consumption. In 2018, carbon prices quadrupled and increased the cost of compliance materially. This turn of events has called for a closer attention of this new and growing exposure by implementation of systematic analysis and risk reducing actions into the Risk Management framework.

Carbon price EUR/Ton 2015-2019

Liquidity risk

Liquidity risk reflects the Group’s ability to fulfil its payment obligations associated with financial and operational liabilities. Liquidity risk management is based on a policy of minimum cash target levels deemed adequate under both normal and stressed conditions. Embedded in the policy are guidelines concerning the quality of the cash equivalents and financial assets. Through risk analysis, and based on past experience, the Group has used an estimation of three-month operating costs as a benchmark for the preferred minimum cash positions, where 30% can be in the form of unused lines of credit. Cash flow requirements and their impact on cash levels are monitored by using rolling currency flow forecasts, which are updated on regular basis.

Credit risk

Credit risk is dependent on the likelihood of a counterparty’s default and the loss of their financial obligations. The greatest part of the exposure is concentrated in the form of cash and cash equivalents. Secondly, there are considerable commitments through trade and other receivables from services rendered. The relative spread of claims across counterparties is a relevant factor contributing to credit risk exposure in addition to the composition of asset classes. The risk is countered by the choice of counterparties and dealt with in the accounts with allowances for impairment. The Group maintains an awareness of potential losses relating to credit risk exposure and chooses its counterparties based on business experience.

Industry-related risk factors

At group and subsidiary levels, management monitors and assesses the airline industry’s risk exposure, which has historically posed uncertainty, even in normal operating conditions. A part of the Company’s culture stems from its long history, including a general recognition of the value of learning from past experience. Yet, in addition to the retrospective view, management systematically focuses attention on potential threats from a prospective viewpoint, as the environment is extremely cyclical. The Group operates and thrives in well-established and defined markets which, as such, can be regarded as valuable intangible assets that require attention. Icelandair’s credibility and reputation are crucial for its market status and growth, but the markets are also sensitive to external factors, such as the macro-economic elements governing aggregate demand. An economic downturn will usually reduce the general purchasing power of potential customers and thereby the demand for air travel. Airlines are prone to even greater vulnerability when it comes to other types of shocks which are more sudden and forceful. Abnormal weather conditions and volcanic eruptions in recent years have caused costly and unanticipated threats of disruptions. Terrorist incidents and pandemics like the Sars and Corona viruses are also examples of events that need to be considered at all times. Factors that can be analysed and monitored with respect to reasonable risk of occurrence and impact call for close monitoring and readily available contingency plans. The ash cloud experience of Eyjafjallajokull Glacier in 2010 and Grimsvotn in 2011 and the Holuhraun eruption in 2014 put the contingency planning and operational flexibility of Icelandair Group to the test. This experience benefits the Group now in light of the recent and future geological unrests in Bardarbunga Glacier, Katla and Hekla volcanoes and most recently in Mt. Thorbjorn. The Company owes its adaptive potential and flexibility of operations chiefly to its capable human resources, contingency policies and economies of scale. The quality of the Company’s responsive processes enables us to cope with other adverse circumstances and industry factors, such as seasonality, competition, insurance and new taxes.

Operational risk

The Group distinguishes between industry-related risks and those which expose the subsidiaries at individual company level. Embedded in the Group’s operations is a natural spread of business risk, not only in terms of market diversification, but also between the subsidiary business models themselves. This dispersion of interests has returned rewards during periods of economic turbulence. Methods of coping with threats of disruptions and disturbances are also decentralised when it comes to operational hazards. Again, the long and successful history of Icelandair Group and its companies is a valuable asset, which serves both as the foundation and the benchmark for many of the policies and contingency plans used across the Group. The Group’s computer and communication systems are crucial for sales and market activities, but also for undisrupted internal operations. Equipment maintenance is needed to guarantee airworthiness. Third-party services may become bottlenecks in the production chain, whether in catering, ground services or flight control. Human resources need to be managed, labour disputes resolved and work stoppages prevented. Wage negotiations are regular, and sometimes extensive, as a result of the number of different unions covering a large majority of the Company’s work force. Management constantly evaluates the risks involved and the potential consequences of individual events. Scenarios are projected, charted and contemplated and action plans launched based on possible outcomes, where collaboration is maintained between the Group and its individual companies.

Enterprise risk management

Risk management needs access to a secure and steady flow of information about all enterprise-related risks at the Group level and thus requires centralised mapping and detailed registration of risk factors and their estimated inherent financial value and potential consequences. The Group’s Risk Management Committee has focused on enterprise-related risk assessment in collaboration with Internal Audit and concentrated on aligning risk records across all subsidiaries to achieve consistency and compliance. The key objective of enterprise risk management is to enhance motivation in risk analysis and improve risk awareness, standardise the quantification of risk and establish the Company culture that is needed to promote everyday risk awareness and risk-reduction measures. Cash-flow stress testing is now performed with enterprise risk inputs by simulating events and scenarios induced by the factors defined in the risk registry. Although based on sensitive and qualitative assumptions, this practice has the merit of shedding light on the possible operational and financial consequences of external and internal disturbances. Annually, results are submitted to the Audit Committee for evaluation and support.