Icelandair Group eked out a small profit during the second quarter as it shifted more of its network towards lower-yielding transatlantic connections amid the impact of seismic activity on demand for travel to Iceland.
While eruptions and earthquakes are commonplace in Iceland, seismic activity in the southwest of the country has attracted international attention in recent months, particularly coverage of evacuations from the town of Grindavik. Icelandair has previously suggested that the media was giving undue attention to those developments, denting demand for travel to the country.
That lower demand continued into the April-June quarter, Icelandair said on 18 July, prompting it to pivot more towards transatlantic connecting traffic at its Keflavik hub.
The airline therefore offset a 15% drop in passengers travelling to Iceland as a destination during the quarter with a 25% increase in connecting passengers.
But the lower yields associated with the airline’s “via Iceland” traffic meant profitability was hit, even as the business cut unit costs by 2.4%.
Furthermore, “from” traffic fell by 9%, with the carrier citing its unwillingness to compete with “unsustainable” low fares offered by local competition.
Group revenue of $409 million in the second quarter was down 1% year on year, while its operating profit of $3 million was down from $21 million a year earlier. Its net profit of $0.6 million was down from $14 million in 2023.
Icelandair’s capacity measured in available seat kilometres was up 8% during the quarter, while traffic grew by 5%.
The group highlighted a profitable performance from its cargo business, following an effort to “right size” to demand, alongside a positive return from its leasing unit, Loftleidir.
Given the uncertainties created by the seismic activity in Iceland, Icelandair did not offer any guidance on its full-year financials. But it notes that increased competition on transatlantic routes is likely to pressure yields and unit revenues across the rest of the year, even with demand “robust”.
