Icelandair posted a first-quarter net loss of $55 million, widened from a $35 million net loss in the year-ago quarter as pressure on airfares, higher costs and Boeing 737 MAX grounding created uncertainty.

The airline reported a 7% decline in operating income to $249 million. Expenses dropped 8% to $263 million in the quarter.

As a result of the MAX grounding, the Reykjavik-based carrier—a long-time Boeing customer—is rethinking its long-term fleet strategy and is also evaluating becoming an all-Airbus operator.

Icelandair’s six-strong 737 MAX 8 fleet has been grounded since March 12. A further three 737 MAX 9s are yet to be delivered and the timing is uncertain.

The airline has updated its flight schedule through July 15 with a 1% capacity reduction.  

Icelandair is wet-leasing Boeing 767s and acquiring a 757 on a temporary basis to compensate for the MAX 8s affected by the global grounding.

The carrier said it has initiated compensation discussions with Boeing.

According to a May 6 statement, Icelandair’s long-term fleet strategy is under review with three possible scenarios:

  • Maintain its current fleet strategy and phase out Boeing 757s with 737 MAX replacement. For 2019, Icelandair had planned to operate 21 757-200s, two 757-300s, four 767-300ERs, six 737 MAX 8s and three 737 MAX 9s. By 2025, the carrier had planned to reach a fleet of 50 aircraft, comprising 17 757-200s, two 757-300s, five 767-300s, 14 737 MAX 8s and 12 737 MAX 9s.
  • A faster fleet renewal with the Airbus A321neo introduced alongside the 737 MAX, which would lead to a faster discontinuation of 757-200 operations.
  • Take all Boeing aircraft out of operations and introduce an all-Airbus fleet. At this stage, Icelandair has no current Airbus orders.

Icelandair said its 1Q operating results were in line with management expectations and its financial position remains strong.

ASKs increased 8% year-over-year (YOY) to 2.9 billion and revenues fell 3% to $153 million, because of lower yields and negative currency effect. Fuel prices rose 5% YOY to 51.8 million. Passengers numbers rose 6% YOY and load factor dipped slightly 0.1 percentage points to 76.4% YOY.

“The number of passengers to Iceland grew by 13%, passenger numbers on the home market from Iceland grew by 10% while passenger numbers between Europe and North America declined by 2%,” Icelandair president & CEO Bogi Nils Bogason said.

Icelandair said its liquidity position remains strong, with $289 million in cash at the end of 1Q.

Improvements in profitability are expected in 2019 as a result of a number of factors, including recent changes in the competitive landscape—such as the bankruptcy of Icelandic ultra-LCC WOW Air—which is expected to have a positive effect.

Icelandair had considered an acquisition of WOW Air, but ended talks March 24.

“The changes that occurred toward the end of the first quarter created opportunities for Icelandair Group for profitable organic growth. In the short term, the suspension of the 737 MAX aircraft will delay the positive impact of these changes,” Bogason said.

Kurt Hofmann,