Icelandair Group hf. - Financial Statement Release

Good results in 2016 – strong balance sheet

  -- Net profit in 2016 USD 89.1 million, as compared to USD 111.2 million in
     2015
  -- Q4 EBITDA USD 2.5 million, as compared to USD 22.9 million in Q4 2015
  -- A fall in average air fares and unfavourable currency trends largely
     account for the reduced results
  -- Total revenue increased by 12% in Q4 2016
  -- Strong financial position: 44% equity ratio and cash and marketable
     securities USD 250.1 million at year-end 2016
  -- Increased uncertainty in the global airline industry
  -- EBITDA forecast for 2017 at USD 140-150 million



Björgólfur Jóhannson, President and CEO

 “The results for the year are the second best in the Company’s 80-year
history, and on the whole operations were successful over the year in
challenging conditions. The Company carried just short of 3.7 million
passengers on international flights, which represents an increase from the
preceding year of 20%, or 600 thousand passengers. Hotel operations showed
significant growth, with good hotel room occupancy, at just short of 82%.
Regional flights also showed success, with a 9% increase in passenger numbers
between years; it is a matter of satisfaction to see foreign tourists
increasingly making use of domestic flight services. Cargo operations were also
successful. 

At the beginning of this year, however, it is clear that circumstances are very
challenging. As we reported last week, Icelandair’s flow of bookings has taken
a negative turn. Bookings are slower than expected, and average airfares in the
market have fallen below projected levels. In the last few days we have seen
news confirming that this development is affecting the airline industry in
general. This trend can principally be traced to increased competition, but it
can also be argued that uncertainty resulting from changes in international
politics has affected demand. The seamen’s strike in Iceland has had a negative
impact on the Company’s cargo operations. Currency trends have been
unfavourable for the Company compared to last year; in addition, fuel prices
are rising. Prospects in our hotel operations are positive. 

We need to look to the future and determine how we intend to meet these changed
circumstances acting in the Company’s long term interest.  Actions have already
been taken in the Group’s operations, which are expected to improve efficiency
and increase revenue. Icelandair will make adjustments in the structure of its
air fares and increase the diversity of its product offerings. This adaptation,
which has been in preparation since last fall, is intended to meet increased
competition and changed patterns of consumer behaviour. The purpose with the
changes is to enable the Company to reach out to new customers, enhance the
Company’s visibility to certain target groups in internet search engines and
broaden the Company’s revenue base. Since last fall cost containment measures
have also been significantly reinforced in the Company. 

It is the Company´s goal that the actions relating to revenue and expenditure
will improve financial results by USD 30 million annually when they are fully
implemented in the beginning of 2018. 

The Company’s balance sheet remains strong, with the equity ratio at 44% and
cash and marketable securities at well over USD 250 million. The Company’s
strategy of maintaining financial strength has always rested on the reasoning
that the operating environment of air carriers is highly subject to
fluctuations. The Company is therefore well placed to address the fluctuations
in its operating environment. We are projecting moderate organic growth over
the year, and the Company’s long-term prospects are favourable.” 



For further information please contact:

Björgólfur Jóhannsson CEO, Icelandair Group, tel. +354-896-1455
Bogi Nils Bogason, CFO, Icelandair Group, tel. +354-665-8801

Attachments:

Pressrelease Q42016.pdf

Arsreikningur Icelandair Group hf 31 12 2016.pdf