Summary
- Icelandair achieved strong capability growth and returned to profitability in 2023, despite significant challenges.
- Record-breaking unit revenues and powerful demand across all markets contributed to the airline’s $1.5 billion in revenue, with passenger services being the most important contributor.
- Although seismic activity and an air traffic controllers’ strike affected flight demand and revenue within the last quarter of 2023, Icelandair stays optimistic.
Icelandair has announced its latest financial results, with the airline showcasing strong capability growth in all of its markets, including cargo and wet leasing. The carrier ended the 12 months with a net profit, adding that it expects to grow its profit margins next 12 months despite the Volcano eruption significantly impacting bookings within the short term.
Ramping up capability
Bogi Nils Bogason, the chief executive officer (CEO) of Islandair, remarked that 2023 marked a major milestone for the airline, because it finally returned to profitability following many difficult years, which included the COVID-19 pandemic. Bogason highlighted Icelandair’s ability to generate revenue, with strong demand across all of its markets leading to record-breaking unit revenues, measured in revenue per available seat kilometer (RASK).
In total, the airline earned $1.5 billion in revenue, split between $1.2 billion from passenger services, $88 million from cargo, $71.3 million from leasing, and $74 million from other sources. Operating expenses amounted to $1.3 billion, with the airline noting that lower fuel prices and hedges offset rising fuel expenses, which grew mainly resulting from the airline’s increased capability and flying program. Consequently, its fuel bill in Q4 2023 rose by only 2% in comparison with Q4 2022.
Photo: yvr_luis I Shutterstock
Nevertheless, Icelandair ended the 12 months with a net profit of $11.2 million, its first profit since 2017. Bogason commented that the airline’s core businesses performed well throughout the 12 months, especially in light of the impact of the external challenges and negative leads to its cargo division.
Still, the manager noted that the seismic activity, including a volcano eruption, resulted in weaker flight demand, affecting revenue growth. Consequently, its last quarter of the 12 months was loss-making, yet the remaining nine months of 2023 offset the $38.2 million loss in Q4.
Along with the seismic activity, Iceland’s air traffic controllers (ATC) went on strike in December 2023, further increasing costs and revenue losses throughout the quarter. The airline highlighted that every day bookings dropped significantly in November 2023, slowly recovering throughout the month.
1000’s Of Icelandair Passengers Disrupted: ATC Strikes To Cost Airline Up To $7 Million
Icelandic air traffic controllers are demanding a wage increase.
Icelandair provides a positive outlook
Bogason added that the outlook for the upcoming peak summer travel season is nice, with demand successfully recovering. In 2024, the carrier will offer 11% more capability than in 2023, flying passengers to 57 destinations, including three latest additions to its network: Pittsburgh International Airport (PIT), Halifax Stanfield International Airport (YHZ), and Vágar Airport (FAE).
Still, Icelandair will give attention to cost optimization in 2024, with the carrier stating that this will probably be the corporate’s top objective throughout the 12 months. The airline noted that despite its planned growth of 11%, it plans to grow on the identical overhead expenses, which reflects its sustainable scalability.
It ended 2023 with 35 aircraft: 21 Boeing 737 MAX, split between 14 737 MAX 8 and 4 737 MAX 9, 14 Boeing 757, and three Boeing 767s. Through the 12 months, Icelandair anticipates taking delivery of three 737 MAX aircraft while retiring a pair of 757s. The carrier also noted that it has firm commitments for a complete of 20 Airbus aircraft, split between seven A321LR and 13 A321XLR, with 12 additional options for the latter. The primary 4 A321LRs should arrive by summer 2025.
Image: Airbus
Consequently of the capability growth and powerful demand, its net profit and earnings before interest and taxes (EBIT) should improve Yr-on-year (YoY). Nonetheless, Icelandair didn’t provide exact guidance, citing uncertainty out there.
On The Up: Icelandair Carried 17% More Passengers Last Yr Than In 2022
Icelandair managed to capitalize on the rapid demand growth in 2023 and carry almost 600,000 more passengers because it did in 2022.