Icelandair’s Financial Situation Up In The Air

In the midst of a global pandemic and economic uncertainty, it seems that Iceland’s sole airline, Icelandair, will be okay, at least for the time being.

The Icelandic government agreed to provide the airline with a state guarantee on a credit line in the amount of up to 16.5 billion ISK, or 120 million USD, RÚV reports.

Negotiations for a line of credit for the airline from the government have been underway recently between Icelandair Group and the Icelandic government in collaboration with Íslandsbanki and Landsbankinn, the company’s commercial banks. The loan is subject to the agreement reached between the parties, the approval of Parliament, and the company achieving its financial goals.

The announcement assumes that flights will be at a minimum until the middle of 2021 due to the coronavirus epidemic. The number of passengers will gradually increase, but is not expected to reach the same level as pre-COVID until 2024.

In addition to the loan, a new agreement with the Boeing aircraft manufacturer will see the airline’s financial obligations decrease RÚV reports.

New Boeing MAX aircraft play a major role in the company’s future plans, although these aircraft have been grounded since March last year. The company expects them to begin flying at the end of 2020. Of the 16 that had been ordered, six have been delivered. The airline plans to cancel the orders on four aircraft, and is claiming compensation for the grounding of the aircraft they received. An agreement with Boeing is said to reduce Icelandair’s future liabilities by 30 billion ISK or 260 million USD.

Creditor’s agreements, such as deferrals of loan principal repayments, are valued at 103 million USD or 14 billion ISK. Even after all of this, it is assumed that Icelandair will not start turning a profit again until 2022.