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Icelandair on Course for Net Profit in 2023 Despite Cargo Challenges and Rising Fuel Costs

Despite turbulence in its cargo sector and a near 30% increase in fuel prices, Icelandair is set to achieve a net profit in 2023. Iceland’s national carrier has recently updated its financial guidance for the year, promising an optimistic outlook for passenger and leasing operations.

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Icelandair Strong Financial Performance Across Multiple Verticals

According to finalized management accounts for July and August, Icelandair showcased strong financial health, particularly in its passenger and leasing operations. The positive momentum in these sectors supports the projected total revenue of around USD 1.5 billion and an EBIT ranging between USD 50-65 million. This EBIT accounts for approximately 3.3-4.3% of the total revenue.

Challenges in Cargo Operations

Although the leasing and passenger sectors are promising, Icelandair’s cargo division faces challenges. The profit improvement projected during the Q2 financial results announcement hasn’t occurred in this department. However, the company has initiated steps to revamp this struggling unit, suggesting a proactive approach to problem-solving.

Soaring Fuel Prices: A Concern but Not a Deterrent

Since the publication of the Q2 financial results, fuel prices have escalated by nearly 30%. The company’s updated guidance is founded on a weighted average fuel price (excluding hedges) of 990 USD m/t. Nevertheless, Icelandair has hedged about 43% of its expected fuel consumption from September to December at a more favorable average price of USD 864 m/t. The USD/ISK exchange rate is estimated to hover around 134 during this period.

Expansion and Future Growth

Icelandair’s financial position remains secure, and the company seems well-placed for further profitable growth. They have already finalized agreements for three new passenger aircraft for the upcoming year. This development will pave the way for a 10% increase in capacity and route network expansion.

Icelandair’s projected net profit for 2023 is a positive sign. The airline industry as a whole has seen cargo demand soften and fuel prices rise. Icelandair is taking strategic actions to ensure stability through these market variations.

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