Icelandair Group made a profit before tax, interest and depreciation (EBITDA) of 12.6 billion ISK (100 million USD, 80 million €) in 2010. This is the best results in the history of the company according to company CEO, Björgólfur Jóhannsson, an improvement of ISK 4.4 billion over the 2009 figure.
Photo: Páll Stefánsson/Iceland Review
Jóhannsson goes on: “This performance is much better than anticipated in our original budget and also exceeds our last profit warning, which projected an EBITDA of ISK 11.5 billion. The improved performance is primarily a result of the significant increase in Icelandair’s passenger revenues. The number of passengers in the North Atlantic market grew substantially, accounting for 38% of the company’s total number of passengers, as compared to 28% in 2009. Also, the improved load factor and good revenue control increased passenger revenues. On top of that, it is satisfying to be able to report that most of our subsidiaries showed good results in 2010.
Secondly, the Company and its staff showed unprecedented resilience and nerve following the Eyjafjallajökull eruption last April. At the same time that virtually all airline communications in Europe were paralyzed for a week or so, we managed to maintain our schedule by transferring our hub to Glasgow and flying to Akureyri instead of Keflavik. Even though the volcanic eruption proved expensive for the Company in the short term, it is my belief that the promotional value of the eruption for Iceland will, over the long term, result in an increase in the number of passengers visiting Iceland.
Finally, the financial restructuring of the Company was brought to a conclusion at the end of the year. I am very pleased with the results of that work. The restructuring was divided into three principal factors: an issue of new shares, a conversion of the debts to the company’s largest creditors into shares, and a reduction in interest-bearing debt resulting from a sale of assets. This resulted in an increased equity ratio from 16.4% at the end of 2009 to 33.7% at the end of 2010.
We have simplified the Company’s strategy, and the focus will now be on the Company’s core operation, which is based on Icelandair’s route network and related operations. We do not expect the results of 2011 to match those of 2010. Higher fuel prices will cut into profits, and in addition we anticipate reductions in passenger yields. Also, it is likely that the expected rises in taxes and charges will have a negative impact on demand, and thereby the operations of the Group. Wage contracts with all Group employees have expired. Such circumstances certainly entail significant uncertainty, but I am hopeful that the conclusion of negotiations will be acceptable for all parties. Competition will harden in the course of the year, and it is important for us to enter the increased competition with agreements in place with all the Group’s employees. Nevertheless, I see no reason for anything but optimism in the coming months. The long-term prospects of the Group are favorable, our business model has, in our opinion, proven its worth and following the restructuring the Company’s balance sheet is sound, and our liquidity position is good.”