Summary
- While initially Icelandair did not provide financial guidance, added certainty has allowed the airline to update its investors about its expected 2024 results.
- The airline expects to maintain sustainable profitability in 2024 and increase its profit during the year.
- Despite several challenges, including external, Icelandair is positive about potential demand for travel to Iceland and other markets.
While Icelandair did not issue financial guidance when the company announced its latest financial results, the airline has now provided an update on its outlook in a financial filing to its current and potential investors, as it had more short-term visibility operationally.
More certainty
The Keflavík International Airport (KEF)-based airline said that since it reported its 2023 full-year results on February 1, 2023, there has been more operational certainty in its operating environment, allowing it to present a more clearer picture to its investors. In part, this was because of the,
“[…] diminishing impact of inaccurate international media coverage of the volcanic activity in Southwest Iceland on bookings and the conclusion of the collective bargaining agreements in the private sector in Iceland.”
Photo: yvr_luis I Shutterstock
At the time, Icelandair’s financial results report stated that there had been uncertainty because of various factors impacting its operations, including strikes, seismic activity, and unsustainable air fares of some airlines in important markets. As such, the carrier refused to provide detailed earnings guidance, adding that it still expected to deliver better results in terms of earnings before interest and taxes (EBIT) and profit after taxes (PAT).
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Icelandair Anticipates Profit Growth in 2024 Despite Volcano Eruption
Icelandair did not provide an exact guidance for its 2024 results, yet expressed expectations that its net profit will grow in 2024.
Sustainable profitability
With Icelandair returning to profitability in 2023, the airline’s latest financial guidance said that it should be profitable in 2024 as well. The airline outlined that its EBIT margin should be between 2% and 4%, while net profit is expected to grow. In 2023, the company reported an EBIT margin of 1.4%, with a net profit of $11.1 million.
Meanwhile, capacity measured in Available Seat Kilometers (ASK) should grow 10% Year-on-Year (YoY), with the growth focused on capacity with the most potential for strong revenue generation and contributions to improved profitability.
Photo: Robert Buchel | Shutterstock
The carrier already had its strongest capacity growth quarter, Q1, with ASKs increasing by 21% YoY. During the two subsequent quarters, capacity should grow by 9%, while in Q4, the airline plans to add 6% ASKs to its network YoY.
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On The Up: Icelandair Carried 17% More Passengers Last Year Than In 2022
Icelandair managed to capitalize on the rapid demand growth in 2023 and carry almost 600,000 more passengers as it did in 2022.
Remaining a popular destination
Icelandair stated that bookings, especially on transatlantic flights, are “good,” adding that the market from Iceland remains strong. Furthermore, the country has remained a popular destination, even if demand has weakened due to seismic activity and diminished pent-up travel trends.
Still, the airline said it was in a strong position to adjust its capacity flexibly, shifting focus on routes to maximize profitability. Despite the short-term negative impact of volcanic eruptions on bookings, Icelandair believes that its home country will continue attracting tourists in the long run.
Photo: PLAY
Iceland’s other airline, PLAY, also highlighted the same events as some of the reasons for its worsened report at the end of 2023 as it reported its yearly financial results. However, the carrier said it felt good about 2024, noting that the year had already started with strong sales momentum, with the low-cost carrier expecting to improve its cash flow and results.
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