The Icelandic state has agreed to extend its sponsorship of Icelandair flights to and from the country until at least June 27. Meanwhile, the airline is in the middle of wage negotiations with its cabin crew, who rejected a contract offer from the company last week. Like many airlines in the world, Icelandair has discontinued most of its flights due to the COVID-19 pandemic and is facing an uncertain future. The airline is hoping to raise USD 200 million (ISK 29 billion/€1.82 million) through a public stock offering in June.
State ensures minimal flights to and from Iceland
Since late March, the Icelandic state has sponsored minimal Icelandair flights to and from the country. Last week, it agreed to extend the sponsorship of flights between Keflavík and Boston, London, and Stockholm until June 27. The airline will operate two flights to each destination weekly, and flights to New York and Copenhagen during the period are also being considered. The state will pay a maximum of ISK 300 million ($2.1 million/€1.9 million) for the flights between May 17 and June 27, and Icelandair’s earnings from the flights will count against the subsidy. The contract has the potential to be extended until September.
While other countries’ governments have directly subsidised struggling airlines, the Icelandic state has taken a fairly hands-off approach to Icelandair’s financial woes. Icelandair’s Minister of Transport Sigurður Ingi Jóhannsson has said it is the responsibility of the company’s board and shareholders to address the challenges the company faces. Opposition MPs and economists have criticised the government for not doing more to support the airline, which many consider to provide an essential service.
Stiff negotiations with staff
In the middle of the pandemic, Icelandair has also found itself in contract negotiations with three groups of staff: pilots, mechanics, and cabin crew. While the airline has signed new contracts with both its pilots and mechanics, it has yet to reach an agreement with the Icelandic Cabin Crew Association, whose members rejected an offer from Icelandair last week. A meeting between the association and the airline was broken off just before 1.00am last night without an agreement.
Icelandair laid off 240 of its 3,400 employees at the end of March. In April a further 2,000 employees followed, constituting the largest mass layoff in Icelandic history. The company’s remaining staff is either subject to a reduced employment ratio or salary cuts.
Shareholders to decide on public stock offering
Icelandair hopes to raise up to USD 200 million (ISK 29 billion/€1.82 million) in equity through a public stock offering in June. The company’s board of directors announced their intentions as “an important part of the financial restructuring of Icelandair Group.” The stock offering is subject to the approval of shareholders, which are scheduled to meet on May 22.
Iceland is set to reopen its borders to tourists no later than June 15, providing COVID-19 tests to arriving travellers.