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Icelandair Group
Presentation of Q4 and FY 2018 ResultsBogi Nils Bogason President and CEO
2
Highlights
Number of measures
taken to improve
profitability
Significant operational
improvements
expected in 2019
EBITDA in Q4 2018
-35 USD million
compared to
-16 USD million LY
Low airfares, high fuel
prices, low utilisation of
pilots and operational
challenges at Air Iceland
Connect causing lower
EBITDA
Financials
USD million Q4 2018 Q4 2017 % Chg.
Operating Income 298.8 291.6 2%
Salaries and related expenses 126.9 115.0 10%
Aircraft fuel 74.1 54.7 36%
Aircraft lease 9.2 5.7 61%
Aircraft handling, landing and comm. 29.3 29.2 0%
Aircraft maintenance expenses 20.6 20.5 1%
Other expenses 73.6 83.0 -11%
Operating expenses 333.8 308.0 8%
EBITDA -35.0 -16.4 113%
EBIT -69.3 -45.8 51%
EBT -69.7 -47.7 46%
Loss for the period -57.3 -39.7 45%
EBITDA ratio -11.7% -5.6% -6.1 ppt
EBITDAR -24.2 -5.4 -
EBITDAR ratio -8.1% -1.8% -6.2 ppt
Pressure on airfares, higher fuel costs, low utilisation of pilots and poor results
of domestic operations causing lower EBITDA
4
EBITDA and loss | USD million
-1.5
22.9
2.5
-16.4
-35.0
-15.0
0.3
-22.9
-39.7
-57.3
Q4 18Q4 14 Q4 16Q4 15 Q4 17
EBITDA
Net loss / profit
Passenger increase in the Route Network 11% and load factor up by
0.5 percentage points
5
1114
0
-13
-33
5
-11
1
8
20 20
0
Passengers
Route Network
Available
HRN Hotels
ASK
Route Network
SLF (ppt)
Route Network
Passengers
Domestic and
Regional flights
Fleet utilisation
Charter flights
Sold BH
Charter flights
SLF (ppt)
Domestic and
Regional flights
ASK Domestic
and Regional
flights
FTK
Cargo
Sold
HRN Hotels
Occupancy (ppt)
HRN Hotels
Q4 year-on-year change in %
ASK = Available Seat Kilometres, BH = Block Hours, HRN = Hotel Room Nights.
0.5
Ancillary revenues per passenger increased significantly between years
Fare = passenger revenues / passengers, Yield = passenger revenues/revenue passenger kilometres
8.9
1.7
5.3
11.9
Production CurrencyPassenger
revenues Q417
-15.4
Yield Load Factor
191.7
Ancillary Passenger
revenues Q418
204.2
7%
16
24
Ancillary per pax Q4Fare Q4
202
190
-6%
+47%
2017
2018
Passenger revenue per passenger | USD Q418 vs Q417 Main changes in passenger revenues | USD Q418 vs Q417
Average fuel price trended downwards in Q4 2018 and market price of carbon
emission allowances tripled in 2018
9
300
350
400
450
500
550
600
650
700
750
800
Sep17J
un17
Fe
b17
Jan17
Dec18
Mar1
7
Dec17
Aug17
May17
Apr1
7
Jul1
7
Jan18
Oct1
7
Nov17
Fe
b18
Apr1
8
Mar1
8
May18
Jun18
Jul1
8
Aug18
Sep18
Oct1
8
Nov18
Average and effective fuel price | USD/tonne 2017-2018
Average world
fuel price
Effective
fuel price
Carbon Emissions Allowances | Q417-Q418 in EUR
8.3
13.3
15.0
21.2
24.6
End Q418End Q417 End Q118 End Q218 End Q318
+199%
PeriodEstimated usage
(tons)Swap volume % hedged Av. swap price USD
Jan 19 25.277 15.450 61% 621
Feb 19 21.102 14.450 68% 644
Mar 19 26.666 15.500 58% 622
Apr 19 29.750 15.450 52% 631
May 19 40.885 21.500 53% 635
Jun 19 49.696 24.500 49% 683
Jul 19 52.286 26.250 50% 692
Aug 19 52.505 28.250 54% 722
Sep 19 45.855 27.250 59% 752
Oct 19 33.902 16.000 12% 753
Nov 19 30.530 11.000 13% 710
Dec 19 29.028 4.000 14% 722
12 months 437.482 219.600 50% 685
Jan 20 25.759 4.000 16% 713
Feb 20 21.502 4.000 19% 789
Mar 20 27.171 4.000 15% 764
Apr 20 30.321 0% 0
May 20 41.677 0% 0
Jun 20 50.663 0% 0
13-18 months 197.094 12.000 6% 755
* weighted average price
50% of estimated usage in 2019 has been hedged at weighted average
swap price of 685 USD/tonne
10
685
755
13-18 months12 months
50%
hedged at
USD 685
average
swap price
6%
hedged at
USD 755
average
swap price
9
5.7
29.2
20.5
8.0
6.3
9.4
13.8
3.9
16.5
14.3
10.8
9.2
29.3
20.6
8.7
5.0
6.2
15.1
5.2
15.5
7.1
10.8
AdvertisingReal estateAircraft lease Cost of goods soldAircraft H-L-C** Aircraft maintenance Booking fees/comm.Communication Customer serv. Tourism. Exp. Other exp.
2017
2018
* All figures are in USD millions
** H-L-C = Handling, Landing, Communication
+AC
on lease at
Loftleidir +
Icelandair
(MAX)
decreasing
with lower
rev. from
tourism
Aviation less fuel
+7%
Other expenses
-11%
new hotel,
hanger and
new lounge
in KEF
USD million 12M 2018 12M 2017 % Chg.
Operating Income 1,510.5 1,418.0 7%
Salaries and related expenses 515.9 445.2 16%
Aircraft fuel 298.8 235.4 27%
Aircraft lease 36.5 21.8 68%
Aircraft handling, landing and comm. 136.4 122.8 11%
Aircraft maintenance expenses 80.9 76.1 6%
Other expenses 365.5 346.7 5%
Operating expenses 1,434.0 1,247.9 15%
EBITDA 76.5 170.1 -
EBIT -57.0 49.6 -
EBT -67.8 48.6 -
Loss / profit for the period -55.6 37.5 -
EBITDA ratio 5.1% 12.0% -6.9 ppt
EBITDAR 126.9 207.8 -
EBITDAR ratio 8.4% 14.7% -6.3 ppt
Challenging year behind us
EBITDA and Net Profit | USD million
154.3
226.7219.8
170.2
76.566.5
111.2
89.1
37.7
-55.6
12M 14 12M 15 12M 16 12M 17 12M 18
EBITDA
Net Profit / Loss
10
Modest growth in passengers in 2018
36%
36%
16%
2015
48%
2014
37%
15%
49%
38%
13%
50%
3,073
2016
12%
52%
2017
36%
13%
51%
2018
2,603
3,679
4,0454,135
+2%ViaTo From
11
9.711.1
13.715.2 16.2
20152014 2016 20182017
+6%
2014 20162015 2017 2018
80.4%83.2% 82.2% 82.7%
81.0%
Passenger mix | number of passengers in thousands Available seat km (ASK) | 2014-2018 in billions
Load factor | 2014-2018
Strong financial position at year-end 2018 with USD 300 million in
Cash and Cash Equivalents
12
Interest
bearing debt
USD 415.9m
Net debt
USD
116.3m
USD million 31.12.2018 31.12.2017 Diff.
Assets
Operating Assets 673.4 652.7 20.7
Intangible assets and goodwill 177.6 180.4 -2.9
Other non-current assets 43.6 126.7 -83.1
Total non-current assets 894.6 959.8 -65.2
Other current-assets 144.9 231.3 -86.4
Assets classified as held for sale 125.2 7.5 117.7
Short term investments 0.0 4.1 -4.1
Cash and cash equivalents 299.5 221.2 78.3
Total current assets 569.5 464.1 105.5
Total assets 1,464.1 1,423.8 40.3
USD million 31.12.2018 31.12.2017 Diff.
Equity and liabilities
Stockholders equity 471.4 596.5 -125.2
Loans and borrowings non-current 147.5 280.3 -132.7
Other non-current liabilities 47.4 78.1 -30.7
Total non-current liabilites 194.9 358.4 -163.4
Loans and borrowings current 268.3 9.3 259.0
Derivatives used for hedging 39.7 1.4 38.3
Trade and other payables 222.8 232.2 -179.9
Liabilities classified as held for sale 52.2 0.0 222.8
Deferred income 214.9 226.1 -11.2
Total current liabilites 797.8 468.9 328.9
Total equity and liabilities 1,464.1 1,423.8 40.3
Equity ratio 32% 42% -10%
Current ratio 0.71 0.99 -0.28
Net interest bearing debt 116.3 64.3 52.1
Interest bearing debt 415.8 289.5 126.3
The Way Ahead
Icelandair Group will implement a new financial reporting standard
IFRS 16 at the start of 2019
14
EBITDA
Depreciation
Net finance cost
Net Profit
Total assets
Equity ratio
Financial metrics USD‘000 IFRS 16 impact excl. Hotels
+66,723
-61,720
-10,679
-5,676
1,432,863
33%
+81,427
-72,303
-18,014
-8,890
1,745,786
27%
IFRS 16 impact incl. Hotels
Overview of the estimated impact
of the IFRS 16 standard on
Icelandair Group’s consolidated
financial statements in 2019, in
the absence of any other
changes, and on the Balance
Sheet as of 1 January 2019.
The impact is shown both
excluding and including Icelandair
Hotels, which are being divested.
Comments
15
Icelandair will take delivery of six B737 MAX in the coming weeks
32
1
3
3
1
2019
5
2020
2
2021
6
Aircraft deliveries 2019-2021
11
aircraft
PDP
finance
completed
7
aircraft
Sale
leaseback
completed
An agreement concluded on the financing of pre-delivery
payments on 11 Boeing MAX aircraft.
Six aircraft scheduled for delivery in 2019 and five aircraft in
2020.
In all, the financing amounts to USD 200 million over the
period.
The Company’s cash position increased by USD 160 million
at the end of 2018 as a result of the agreement, as
Icelandair Group had already made pre-delivery-payments
out if its own funds.
Sale and leaseback arrangements have been concluded for
seven Boeing 737 MAX aircraft. Six aircraft scheduled for
delivery in 2019, one aircraft scheduled for delivery in 2020.
B737 MAX 9
B737 MAX 8
Capacity increasing by 10% in 2019 – available seats in Europe growing more
than in N-America to correct imbalance from LY
16
4,663
3,073
49%
3,679
37%
36%
15%
13%
2019F2015
38%
50%
2016
12%
52%
2017
36%
13%
51%
2018
4,053 4,135
+13%
To
From
Via
Passenger mix | number of passengers in thousands
Increased
frequency
N-America
Byrjun
2.5%
Increased
frequency
Europe
6.5%
0.7%
New
destinations
Europe
Total
9.7%
Change in ASK | 2018 vs 2019 forecast
Total
Q1 Q2 Q4Q3 2019F
8%
12%
10%8%
9.7%
Actions taken to improve profitability in 2019
17
The performance of
Icelandair in 2018 was
unacceptable.
A number of actions have
been taken to improve
operations in 2019
Imbalance in
the Route
Network corrected
Implementation of a
new revenue
management system
Focus on
strengthening
sales and marketing
activities
Increased
emphasis
on ancillary revenue
New connection bank,
which will improve
resource utilisation
Strengthening of
processes to reduce
disruptions in the Route
Network
Improved
utilisation
of manpower
Outsourcing
Domestic
flight operation under
review
18
69%
80%
Feb 18 Oct 18
67%
Jan 18 Sep 18Mar 18
81%
Dec 18Apr 18
69%
May 18
39%
Jun 18
64%
55%
Jul 18 Aug 18
78%79%
78%
Nov 18
79%84%
Jan 19
The cost of unpunctuality and disruptions
in flight schedules amounted to
approximately USD 45 million in 2018.
The aim of the Company is to reduce this
cost at least by about 40% in 2019
through:
improved punctuality
changes in the Route Network
infrastructure reinforcements
On time performance January 2018-January2019
Aim to reduce IRROPS cost by 40% in 2019
IRROPS cost = cost related to Irregular operations
2019 Guidance
19
International flight operations
Significant improvements in profitability expected in 2019 because of a number
of strategic and operational actions. However because of the greater
uncertainty in revenue forecasts than before and uncertainty in the labour
market in Iceland, an EBITDA guidance for the year is not issued at this stage.
Worse financial performance
expected in Q1 2019 than in Q1
2018. Average air fares have not
increased between years, and the
timing of Easter will have an
impact on demand.
Icelandair Group's long-term
business objective remains
unchanged, with an average 7%
EBIT ratio.
Other core operations
A slight performance improvement is anticipated from other core operations in
2019, which returned USD 37 million in EBITDA in 2018.
Companies in sales process
The sales process of Icelandair Hotels is expected to be finalized in 2019 and it
has been announced that the sales process of Iceland Travel is currently being
prepared. The EBITDA of these assets was USD 16 million in 2018.
Board of Directors
President and CEO
Internal Audit
Finance
CFO
People and Culture
CHRO
Sales and
Marketing
CCO
Customer
Experience
CXO
Aviation
Investments
Tourism
Investments
Air Iceland
Connect
Loftleiðir
Icelandic
Icelandair
Hotels
Iceland
Travel
Vita
Corporate Communication Corporate Affairs
Operations
COO
Old
Organisational
Structure
Icelandair Group
New
Organisational
Structure
Icelandair Group
Fleet and Network
Ívar S. Kristinsson
Digital Development & IT
Tómas Ingason
Board of Directors
President and CEOBogi Nils Bogason
Internal Audit
Finance
Eva Sóley Guðbjörnsdóttir
People and Culture
Elísabet Helgadóttir
General Counsel Communications and CSR
Sales and
Customer
ExperienceOperations
Air Freight
and
Logistics
Aircraft
Leasing and
Consulting
Birna Ósk
Einarsdóttir
Jens
Þórðarson
Gunnar Már
Sigurfinnsson
Árni
Hermannsson
22
Our mission is clear:
To improve the Company’s profitability
and strengthen the operations for the future
Disclaimer
23
| This material has been prepared by Icelandair Group hf. It may include confidential information about Icelandair Group hf. unless stated otherwise all
information is sourced by Icelandair Group hf.
| The circulation of the information contained within this document may be restricted in some jurisdictions. It is the responsibility of the individual to comply with
any such jurisdictional restrictions.
| Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Icelandair Group. Past performance
should not be viewed as a guide to future performance. Where amounts involve a foreign currency, they may be subject to fluctuations in value due to
movements in exchange rates.
| Icelandair Group cannot guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on
sources that Icelandair Group believes to be reliable. Neither Icelandair Group nor any of its directors or employees can however warrant that all information
is correct. Furthermore, information and opinions may change without notice. Icelandair Group is under no obligation to make amendments or changes to this
presentation if errors are found or opinions or information change. Icelandair Group accepts no responsibility for the accuracy of its sources or information
provided herein and therefore can neither Icelandair Group nor any of its directors or employees be held responsible in any way for the contents of this
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Reykjavík Airport
101 Reykjavík Iceland
Tel: +354 50 50 300
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