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Icelandair CEO resigns as crisis deepens

Björgólfur Jóhannsson is stepping down as the airline warns its results will be “worse than projected”.

A deepening crisis at Iceland’s flag carrier has prompted the resignation of the group’s president and chief executive, Björgólfur Jóhannsson.

Bogi Nils Bogason, chief financial officer, will step in as interim president and CEO while the Board of Directors searches for a new leader.

The news comes together with the release of an updated forecast for the year that warns the results will be “worse than projected”. Based on current assumptions, the company is projecting its EBITDA for 2018 to be in the range of $80-100 million, approximately half that of a projection made earlier this year, which was itself cut in July.

“There are primarily two reasons for the lowered revenue forecast. Firstly, we still expected rising average fares during the final months of the year in the updated EBITDA forecast published on July 8, due to the cost increases for airlines. Now we expect the rising of average fares to occur later, that is not until 2019.”

He added: “The updated forecast is mainly based on the fact that the company’s revenue will be lower than anticipated.”

Secondly, the outgoing chief executive explained that structural changes in the sales and marketing department made last summer were not implemented well enough and changes in the airline’s route network have resulted in “an imbalance between Europe flights and North America flights”.

$50-80mn less revenue
Due to this, the company’s revenue forecasts, which are among other things based on historical development, “have not been providing accurate results”, Jóhannsson admitted.

Icelandair now estimates that the results of these changes are that passenger revenues will be 5-8% ($50-80 million) lower than expected this year.

The carrier has also suffered from a catastrophic number of flight delays, with half of its flights in July delayed according to a recent study.

The company stresses that it has taken various measures to respond to developments, which “have already proven successful, but we estimate that it will take some months for the positive effects of the changes to be reflected in the company’s results”.

It adds: “We estimate that the negative impact of this year will be a one-time-event.”

Jóhannsson said: “The decisions described above were made during my shift and it is clear that they have had negative financial impact on the company this year. […] Earlier today, I submitted my letter of resignation to the Board of Directors.

Úlfar Steindórsson, chairman of the board, added that “Björgólfur […] leaves the company in a good financial condition; Icelandair Group’s cash and cash equivalents were $251 million the end of the second quarter and the equity was $530 million. It shows Björgólfur’s strength of character to assume responsibility when the company’s operations could have been better.”

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