Morgunbladid: Do Icelandic airlines fix prices? Skip to content

Morgunbladid: Do Icelandic airlines fix prices?

Last Thursday, the weekly business section of Morgunbladid featured several articles on Icelandic airlines.

Iceland now has three major aviation and travel services companies. Avion Group includes charter airlines Air Atlanta and Excel Airways; FL-Group, previously known as Flugleidir, is comprised of Icelandair, charter airline Loftleidir, domestic airline Flugfélag Íslands, and several other travel and aviation companies; and investment company Fons owns budget airline Iceland Express and has also recently acquired the Danish airlines Sterling and Maersk Air.

British Airways recently announced that it would start flying to Iceland from London’s Gatwick airport next spring, but currently, only Icelandair and Iceland Express maintain scheduled passenger services to and from Iceland.

“Sterling had 90% capacity utilization in July” reads a prominent headline on the first page of the business section. Morgunbladid interviews Almar Örn Hilmarsson, CEO of Sterling. He says Sterling and Maersk Air had 90 and 82 per cent capacity utilization in July, respectively, and that the number of passengers traveling with Sterling has increased every month of this year compared to last year.

Almar also says that Danish competition authorities have just approved the merger of the two airlines, and that the new owners are planning to start reorganizing the operations of the merged companies as soon as they gain formal control of Maersk Air. He does not expect to turn a profit this year but predicts that next year the merged airlines will show a profit.

Inside the business section, Morgunbladid reports on the departure of Einar Sigurdsson, SVP of Resource Management and Business Development at FL Group. His successor will be Thorsteinn Örn Gudmundsson, a former McKinsey consultant.

In a separate story, Morgunbladid also covers FL-Group’s acquisition of shares in UK airline EasyJet. “Further purchases of shares uncertain – Support of largest shareholder Stelios Haji-Ioannou said to be required for FL-Group to continue investing in EasyJet” reads the headline. The story summarizes events to date and quotes FL-Group CEO Ragnhildur Geirsdóttir saying that FL-Group will not declare its intentions concerning EasyJet.

Aviation is also the subject of the weekly “Insider” column.

Insider starts by speculating if the departure of SVP Einar Sigurdsson from FL-Group is linked to the recent resignation of 6 out of 7 board members at FL-Group; it also wonders if more managers will soon follow.

Insider goes on to say that the management team that has led Flugleidir over the past years has done an excellent job in running the company. It is normal to expect some departures, writes Insider, “but it also matters why people leave”. Except for Inga Jóna Thórdardóttir, neither the outgoing members of the FL-Group board nor Einar Sigurdsson have explained their departure. The weight of the words she used to explain her resignation at the recent extraordinary shareholder meeting becomes “more and more each time the speech is read,” says Insider.

“Changes such as those recently witnessed at FL-Group are usually primarily a matter for the shareholders,” says Insider, “but sometimes they also involve others.” Insider notes that only a few years ago, in the wake of the attacks of September 11, 2001, Flugleidir had to seek assistance from the Icelandic government to insure its fleet, as did other airlines around the globe. “This shows that airline managers must understand that they occasionally are forced to consult a wider constituency than the shareholders,” writes Insider.

“Another issue which concerns a broader audience than just the shareholders is fare prices,” says Insider. “Icelanders are obviously vulnerable to fare prices,” writes Insider. “Two years ago it was the talk of the town that prices were favorable, but now those voices that claim that competition between Icelandair and Iceland Express is a thing of the past grow louder and louder,” says Insider. “The two companies’ spokesmen deny these accusations. [But], to judge by the phone calls people have made to the editors of Morgunbladid over the past few months, the general public, which studies airfares on their computers at home, is of a different opinion,” writes Insider.

Insider concludes: “Such advocates of private enterprise as Hannes Smárason [chairman of FL Group] and Pálmi Haraldsson [co-owner of Fons] won’t permit themselves getting caught fixing prices of international airfares. We can trust that. Can’t we?”

( Pálmi Haraldsson previously served as CEO of food products wholesaler Sölufélag garðyrkjumanna. In 2001, the Icelandic Competition Authority found Sölufélag garðyrkjumanna guilty of “fixing prices” and “conspiring against the public” and fined the company. The latter charge was subsequently annulled by the appeals committee of the Competition Authority and the fines reduced. The company also appealed to the courts, but last year the Supreme Court confirmed the verdict for price fixing and fines imposed by the appeals committee.)

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