Icelandair updates profit guidance; pessimistic about 737 MAX
The flag carrier of Iceland, Icelandair, has issued new profit guidance for the full year 2019. Despite difficult operational conditions regarding the 737 MAX groundings and diminishing passenger numbers at its base airport, Keflavik International Airport (KEF), the airline announced that its guidance for the year had been revised upwards. Furthermore, Icelandair also adjusted its flight schedules, removing the 737 MAX from service until at least March 2020.
Icelandair’s provisional Q3 2019 financial results are very similar compared to the same period last year, the statement reads. The new guidance estimates that the carrier’s earnings before interest and tax (EBIT) in 2019 will be in the negative $35-55 million range, including the impact of the 737 MAX groundings. In FY2018, the airline’s net loss equaled $55.5 million, the first unprofitable year since 2009, while its EBIT was minus $56.9 million.
Icelandair expects the Boeing 737 MAX to return to service in February 2020, following its newest schedule update. Thus, the costs of returning the aircraft to an airworthy condition will be incurred in 2020, rather than 2019, the statement notes.
In addition, the “actions taken to mitigate the impact” of the 737 MAX groundings are starting to take shape, according to the press release. The airline adjusted the expected negative impact of the suspension to $110-120 million at the end of 2019. Previously, the impact of the grounding was estimated to be around $135 million. Less than a month ago, on September 20, 2019, Icelandair announced it reached a deal with Boeing for the aircraft manufacturer to cover a “fraction” of the losses incurred.
The airline also has cut capacity on unprofitable routes on August 16, 2019, including the reduction of available seats on flights from Keflavik (KEF) to several destinations in North America. With the next summer schedule, Icelandair will not return to San Francisco International Airport (SFO) and Kansas City International Airport (MCI) “due to commercial reasons”.
Icelandair is set to announce its full Q3 2019 financial results on October 31, 2019.
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