Icelandair loses $40.9 million in the second quarter mainly due to MAX grounding

Icelandair Group lost $40.9 million in the second quarter, an increase in losses by 63% from the loss of $25.1 million in the same quarter last year.

The grounding of its Boeing 737 MAX aircraft on March 12 has resulted in a significant impact for the company.

The company issued this statement:

  • Total revenue amounted to $402.8 million in the second quarter, up by 1% between years.
  • EBIT was negative by $24.1 million, down by $4.3 million from the preceding year.
  • EBIT was positive by $25.9 million without the estimated impact quantified to date of MAX aircraft suspension, up by $45.7 million from the preceding year.
  • Icelandair transported 39% more passengers to Iceland in the second quarter compared to the same period in 2018.
  • Equity ratio at the end of June was 25% compared to 28% at year-end 2018 based on the same accounting principles. Net of impact of IFRS 16 the equity ratio was 31%.
  • Cash and cash equivalents amounted to $175.0 million at the end of the quarter.
  • Day-to-day operations in the second quarter were marked by the suspension of the MAX aircraft, with the estimated negative impact quantified to date in the quarter at around USD 50 million.
  • EBIT guidance for 2019, net of the MAX suspension, is positive of USD 50-70 million. Taking the estimated impact quantified to date of the MAX suspension into account, the EBIT guidance for the year is negative of $70-90 million.
  • Share capital increase of 625.000.000 at nominal value took place in the second quarter in relation to the purchase of 11.5% of issued shares by PAR Capital Management for $47 million.

Bogi Nils Bogason, President & CEO

“The MAX aircraft were intended to cover 27% of Icelandair’s passenger capacity in 2019. For this reason, the position in which the Company now finds itself as a result of the suspension of the MAX aircraft is without any precedent and has a significant impact on the operations and performance of the Company.

In these circumstances, our key focus has been on minimising the impact of the suspension on the Company, our passengers and the Icelandic tourism industry by adding leased aircraft to our fleet during the summer. We have also placed emphasis on ensuring seating capacity to and from Iceland, with the result that the number of Icelandair’s passengers travelling to Iceland has increased by 39% in the second quarter compared to the same period last year. Despite these mitigating measures, which have prevented major cancellations of flights, the situation has caused considerable disruptions in our flight schedule and our operations. This has in turn impacted our passengers and presented us with complex challenges. Our employees have done an outstanding job under very difficult circumstances during the peak season, where they have joined forces to resolve matters for our passengers as successfully as possible.

The objective of the Company remains clear – to improve the profitability and operations of the Company. We have taken a number of measures over the recent months that are already beginning to return results. The Company’s performance, if the estimated impact quantified to date of suspension of the MAX aircraft is excluded, has improved between years, with EBIT positive by $25.9 million, up by $45.7 million from the preceding year.

Furthermore, an experienced international investor, PAR Capital Management, joined the Company’s shareholder base in April and, in addition, we signed an agreement on the sale of Icelandair Hotels  and related real estate in July. Both of these developments will strengthen Icelandair’s position further and provides an important confirmation of the favourable outlook for the Company and future opportunities in Icelandic tourism.”

Is Icelandair ready now to jump to Airbus?

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