Icelandair cuts 2018 guidance on slow yield growth, high fuel costs
Icelandair president & CEO Björgólfur Jóhannsson resigned Aug. 27 as the group further lowered its EBITDA guidance for 2018 to $80-$100 million, down by about 50% since the beginning of the year.
The Icelandic company was originally expecting a $170-$190 million full-year EBITDA, but on July 10 lowered the guidance to $120-$140 million.
Jóhannsson said the updated forecast is “mainly based on the fact that the company’s revenue will be lower than anticipated.”
Icelandair is still expected to increase average fares during the final months of the year. “Now, we expect the average fare increase to occur later, that is not until in 2019,” Jóhannsson said.
Structural changes at the company’s sales and marketing department, which were made in the summer of 2017—such as a new fare structure—were not successful enough. In addition, changes in the company’s route network have resulted in an imbalance between Europe flights and North America flights.
As a result, Icelandair estimates passenger revenues will be 5%-8% ($50-$80 million) lower than expected this year.
ATW understands that increased competition from LCCs like Norwegian or Nordic Primera Air on North Atlantic routes have increased pressure on Icelandair.
According to the carrier, the LCC market share on North Atlantic routes rose to 9.5% in 2017. Also, competition to and from Iceland has increased, as 27 airlines serve the island.
Icelandair said it has taken various measures to respond to this development, which have already proven successful, “but we estimate that it will take some months for the positive effects of the changes to be reflected in the company’s results. We estimate that the negative impact of this year will be a one-time event,” Jóhannsson said…
