Icelandair CEO Bogi Nils Bogason anticipates that his company’s air fares will be higher this winter than they were last year, RÚV reports.
Inflation figures published by Statistics Iceland seem to bear this hypothesis out: air fares have already gone up 6% between June and July. Research departments at Icelandic banks are actually surprised the increase hasn’t been higher, but also point out that at the moment, it’s 12% cheaper to take flights abroad from Iceland than it was in July 2018.
“As it now stands, there are still 25 airlines flying to and from Iceland, so there is a lot of competition and we have to make a good show for ourselves within that,” remarked Bogi Nils. “Then there are quite a few forces that have an effect on fares. The weather, for example. There’s been fantastic weather in Iceland, so there is less demand for flights abroad. Much less, than there was, for example, during the same time period last year. So there are a lot of things that drive fares and demand and that’s what’s fun about this industry.”
Bogi Nils says, however, that he thinks the competition within the market was unusual last year, hence the projected rise in fares this coming winter.
These fare projections come in the wake of news that Icelandair lost almost ISK 11 billion ($89.6 million/€80.7 million) in the second quarter this year, according to the financial report published by the company on Thursday. Much of its losses are attributed to costs and lost revenue from the grounding of its three Boeing 737 Max 8 planes this spring. The decision to ground these planes was also made by airlines in the UK, Norway, Indonesia, Australia, China, and Singapore following the crash of a Boeing 7373 Max 8 operated by Ethiopian Airlines in which 157 passengers lost their lives and a previous crash five months earlier. Both planes crashed shortly after takeoff.
Bogi Nils says that Icelandair expects to receive some compensation from Boeing for the lost revenue and that negotiations with the plane manufacturer are already underway.