Icelandair, group, company, ebitda, earnings, forecast, capacity, weather, 2018, warning, profit
Icelandair

Icelandair slashes earnings forecast

The airline group blames a multitude of factors for reduced EBITDA guidance for 2018.

The current prospects for Icelandair Group’s operations in 2018 are less favourable than earlier anticipated, the company revealed this morning.

Based on current assumptions, the group is projecting its earnings before interest, taxes, depreciation, and amortisation (EBITDA) for this year to be in the range of US$120 million to US$140 million.

Although the company’s interim financial statement has not been finalised, “it is apparent that performance in the second quarter will fall short of projections”, it warns in a statement.

Disruptions in Icelandair’s flight schedule in recent weeks, including delays in commissioning aircraft, adverse weather conditions and other negative factors, have resulted both in increased expenses and lost revenue.

In the course of preliminary work on preparing its interim financial statement for the second quarter, the company has been analysing the assumptions used in its earnings estimate for the second half of the year. Its projections for rising average fares in the second half have so far not materialised, in spite of a 50% rise in fuel prices over the past 12 months.

As a result, the company has decided to reduce its revenue forecast for the second half of the year.

More bad news
Iceland Travel, which is part of the group, has seen a significant number of cancellations recently that will negatively impact that line of the business this year.

In addition, an increase in capacity across the Atlantic in some of the airline’s key markets has affected the peak-season fare trend.

The company also says it is investing in new destinations this year to strengthen its network for the future – but the rate of bookings on flights to these destinations is falling short of anticipations. Earlier this year, it revealed it would fly to India in 2019.

For the longer term, the company insists that its prospects are favourable, as it is “seeing growth in most markets, it is financially strong and enjoys a solid market position”.

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