Icelandair’s ‘Strong’ Outlook Follows Solid Covid Recovery

 - February 3, 2023, 12:35 PM
Icelandair plans to take delivery of four more Boeing 737 Max 8s this year, bringing its fleet total to 20. (Photo: Boeing)

Icelandair has mapped out “very ambitious” growth plans for 2023 and is preparing to operate 15 to 20 percent more available seat kilometers than it did last year, resulting in “by far the highest connectivity” in its history.

The expansion comes despite a challenging business environment, marked by high inflation, increasing costs, and volatile supply chains. “We are, however, confident that people will continue to prioritize travel… as we see reflected in our near-term booking flow,” said Icelandair Group president and CEO Bogi Nils Bogason during the company’s full-year results call on Friday. The airline registered record sales for the month of January and all markets are performing well while North America shows “significant strength,” he noted.

“We are very optimistic and excited for the year ahead,” Bogason remarked. “We see a strong outlook for the year,” he said, characterizing operations and financial performance as “back on track, stronger than ever” after four challenging years, marked by financial losses and the Covid pandemic. He described 2022 as a “turnaround year” during which the group used its flexible business model to rapidly increase capacity to meet demand recovery in all markets. Capacity recovered to 95 percent of pre-pandemic levels in the fourth quarter and the company posted a full-year operating profit of $18.8 million. 

In peak summer, Iceland’s national carrier plans to operate some 950 departures a week. It expects to add services to Detroit in the U.S., Barcelona and Prague in Europe, and Tel Aviv in Israel, boosting its passenger route network to 54 destinations—30 in Europe and 14 in North America. Increased frequencies to destinations on both sides of the Atlantic, which it connects over its hub at Keflavik airport, will account for most of the flight schedule’s growth. It plans to serve six destinations in North America at least twice daily.

Expanding Aircraft Fleet

The arrival of more Boeing 737 Max narrowbodies to replace its aging 757s has accommodated the shift of its business model to higher frequencies and more diverse departure times, spanning three connection banks. “The Max has already created new opportunities for Icelandair and will continue to play a key role in our network development,” asserted Bogason.

The Max fleet also positively contributed to fuel savings last year, remarked Icelandair chief financial officer Ivar Kristinsson, while Bogason called the Max twinjets fundamental in achieving the airline’s CO2 reduction goals. In the fourth quarter of 2022, Max jets accounted for 64 percent of Icelandair’s flights. “Fleet renewal is currently the most effective measure to reduce emissions,” said Bogason, acknowledging that it will need to take a combination of further measures—such as the implementation of sustainable aviation fuels and operational efficiencies—over the next years to reach the company’s carbon reduction targets.

Icelandair aims to reduce carbon emissions by 50 percent per operational ton kilometer (OTK) by 2030 and reach net-zero emissions by 2050. Its CO2 emissions per OTK in 2022 fell 18 percent compared with its 2019 baseline.

The air carriers’ sustainability goals call for carbon-free domestic operation by the end of this decade. To aid the effort, Icelandair has signed a letter of intent with Heart Aerospace to potentially acquire the Swedish manufacturer’s hybrid-electric, 30-passenger regional airliner. It also inked a letter of intent with Universal Hydrogen to convert its 37-seat De Havilland Canada Dash 8 turboprops to hydrogen power.

Icelandair plans to deploy 40 aircraft in the summer of 2023, five more than in the summer of 2022. Thirteen Boeing 757s, three 767s, and eighteen 737 Maxes will serve international routes while six Dash 8s will operate the domestic and Greenland flights. Icelandair took delivery of seven Max aircraft last year and plans for a further four to enter the fleet this year, bringing its Max fleet to 20.

The airline plans to reveal the next phase of its fleet renewal during the first half of this year. The review of its future fleet needs, to support growth and the replacement of its 757s, has gone on for several years. “These re-fleeting options include the 737 Max as well as the Airbus A320 family,” the airline stated. “Dialogue with the respective aircraft manufacturers is ongoing with the intention to secure a delivery stream of aircraft throughout the decade.”

To support the development of its airfreight hub at Keflavik, Icelandair plans to add a second Boeing 767 BCF to its fleet during the first quarter of 2023.