Icelandair Group Presentation of Q4 and FY 2018 Results - Bogi Nils Bogason President and CEO
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Icelandair Group Presentation of Q4 and FY 2018 Results Bogi Nils Bogason President and CEO
Highlights
Number of measures
Low airfares, high fuel
taken to improve
EBITDA in Q4 2018 prices, low utilisation of
profitability
-35 USD million pilots and operational
compared to challenges at Air Iceland
Significant operational
-16 USD million LY Connect causing lower
improvements
EBITDA
expected in 2019
2
Financials
Pressure on airfares, higher fuel costs, low utilisation of pilots and poor results
of domestic operations causing lower EBITDA
USD million Q4 2018 Q4 2017 % Chg. EBITDA and loss | USD million
Operating Income 298.8 291.6 2%
EBITDA
Salaries and related expenses 126.9 115.0 10%
Net loss / profit
Aircraft fuel 74.1 54.7 36%
Aircraft lease 9.2 5.7 61% 22.9
Aircraft handling, landing and comm. 29.3 29.2 0%
Aircraft maintenance expenses 20.6 20.5 1%
Other expenses 73.6 83.0 -11%
2.5
0.3
Operating expenses 333.8 308.0 8%
EBITDA -35.0 -16.4 113% -1.5
EBIT -69.3 -45.8 51%
EBT -69.7 -47.7 46% -15.0 -16.4
Loss for the period -57.3 -39.7 45%
-22.9
-35.0
EBITDA ratio -11.7% -5.6% -6.1 ppt -39.7
EBITDAR -24.2 -5.4 -
EBITDAR ratio -8.1% -1.8% -6.2 ppt
-57.3
Q4 14 Q4 15 Q4 16 Q4 17 Q4 18
4Passenger increase in the Route Network 11% and load factor up by
0.5 percentage points
Q4 year-on-year change in %
20 20
14
11
8
5
0.5
0 1
0
-11
-13
-33
Passengers ASK SLF (ppt) Passengers ASK Domestic SLF (ppt) Fleet utilisation Sold BH FTK Available Sold Occupancy (ppt)
Route Network Route Network Route Network Domestic and and Regional Domestic and Charter flights Charter flights Cargo HRN Hotels HRN Hotels HRN Hotels
Regional flights flights Regional flights
5
ASK = Available Seat Kilometres, BH = Block Hours, HRN = Hotel Room Nights.Ancillary revenues per passenger increased significantly between years
Passenger revenue per passenger | USD Q418 vs Q417 Main changes in passenger revenues | USD Q418 vs Q417
7%
-6% 204.2
202
11.9
8.9
190 +47%
191.7 -15.4
24
5.3
16 1.7
2017
2018
Fare Q4 Ancillary per pax Q4 Passenger Production Yield Load Factor Currency Ancillary Passenger
revenues Q417 revenues Q418
Fare = passenger revenues / passengers, Yield = passenger revenues/revenue passenger kilometresAverage fuel price trended downwards in Q4 2018 and market price of carbon
emission allowances tripled in 2018
Average and effective fuel price | USD/tonne 2017-2018 Carbon Emissions Allowances | Q417-Q418 in EUR
800
+199%
Average world
750 fuel price 24.6
700
21.2
650
600
Effective 15.0
550 fuel price
13.3
500
450 8.3
400
350
300
Jan17
Feb17
Mar17
Apr17
May17
Jul17
Aug17
Sep17
Oct17
Nov17
Dec17
Jan18
Feb18
Mar18
Apr18
May18
Jun18
Jul18
Aug18
Sep18
Oct18
Nov18
Dec18
Jun17
End Q417 End Q118 End Q218 End Q318 End Q418
950% of estimated usage in 2019 has been hedged at weighted average
swap price of 685 USD/tonne
Estimated usage
Period Swap volume % hedged Av. swap price USD
(tons) 755
Jan 19 25.277 15.450 61% 621
Feb 19 21.102 14.450 68% 644 685
Mar 19 26.666 15.500 58% 622
Apr 19 29.750 15.450 52% 631
May 19 40.885 21.500 53% 635
Jun 19 49.696 24.500 49% 683 50%
Jul 19 52.286 26.250 50% 692 hedged at
Aug 19 52.505 28.250 54% 722 USD 685
Sep 19 45.855 27.250 59% 752 average
Oct 19 33.902 16.000 12% 753
swap price
Nov 19 30.530 11.000 13% 710
Dec 19 29.028 4.000 14% 722
12 months 437.482 219.600 50% 685
6%
hedged at
Jan 20 25.759 4.000 16% 713
USD 755
Feb 20 21.502 4.000 19% 789
average
Mar 20 27.171 4.000 15% 764
swap price
Apr 20 30.321 0% 0
May 20 41.677 0% 0
Jun 20 50.663 0% 0
13-18 months 197.094 12.000 6% 755
* weighted average price 12 months 13-18 months
10Aviation less fuel Other expenses
+7% -11%
29.2 29.3
20.5 20.6
16.5
15.5
15.1
14.3
13.8
10.8 10.8
9.2 9.4
8.7
8.0
7.1
6.3 6.2
5.7
5.0 5.2
+AC
on lease at new hotel, 3.9 decreasing
Loftleidir + hanger and with lower
2017
Icelandair new lounge rev. from
(MAX) in KEF tourism 2018
Aircraft lease Aircraft H-L-C** Aircraft maintenance Real estate Communication Advertising Booking fees/comm. Cost of goods sold Customer serv. Tourism. Exp. Other exp.
* All figures are in USD millions 9
** H-L-C = Handling, Landing, CommunicationChallenging year behind us
USD million 12M 2018 12M 2017 % Chg.
EBITDA and Net Profit | USD million
Operating Income 1,510.5 1,418.0 7%
Salaries and related expenses 515.9 445.2 16% EBITDA
Aircraft fuel 298.8 235.4 27%
Net Profit / Loss
Aircraft lease 36.5 21.8 68% 226.7
219.8
Aircraft handling, landing and comm. 136.4 122.8 11%
Aircraft maintenance expenses 80.9 76.1 6%
Other expenses 365.5 346.7 5%
170.2
154.3
Operating expenses 1,434.0 1,247.9 15%
EBITDA 76.5 170.1 -
111.2
EBIT -57.0 49.6 -
89.1
EBT -67.8 48.6 - 76.5
66.5
Loss / profit for the period -55.6 37.5 -
37.7
EBITDA ratio 5.1% 12.0% -6.9 ppt
EBITDAR 126.9 207.8 -
EBITDAR ratio 8.4% 14.7% -6.3 ppt
-55.6
12M 14 12M 15 12M 16 12M 17 12M 18
10Modest growth in passengers in 2018
Passenger mix | number of passengers in thousands Available seat km (ASK) | 2014-2018 in billions
To From Via
+2% +6%
4,135 15.2 16.2
4,045
13.7
3,679 11.1
9.7
36% 36%
3,073
38%
2,603 2014 2015 2016 2017 2018
37%
12% 13%
36% 13% Load factor | 2014-2018
15%
16%
83.2% 82.2% 82.7%
52% 51% 80.4% 81.0%
50%
49%
48%
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
11Strong financial position at year-end 2018 with USD 300 million in
Cash and Cash Equivalents
USD million 31.12.2018 31.12.2017 Diff. USD million 31.12.2018 31.12.2017 Diff.
Assets Equity and liabilities
Operating Assets 673.4 652.7 20.7 Stockholders equity 471.4 596.5 -125.2
Intangible assets and goodwill 177.6 180.4 -2.9 Loans and borrowings non-current 147.5 280.3 -132.7
Other non-current assets 43.6 126.7 -83.1 Other non-current liabilities 47.4 78.1 -30.7
Total non-current assets 894.6 959.8 -65.2 Total non-current liabilites 194.9 358.4 -163.4
Loans and borrowings current 268.3 9.3 259.0
Other current-assets 144.9 231.3 -86.4
Derivatives used for hedging 39.7 1.4 38.3
Assets classified as held for sale 125.2 7.5 117.7
Trade and other payables 222.8 232.2 -179.9
Short term investments 0.0 4.1 -4.1
Liabilities classified as held for sale 52.2 0.0 222.8
Cash and cash equivalents 299.5 221.2 78.3
Deferred income 214.9 226.1 -11.2
Total current assets 569.5 464.1 105.5
Total current liabilites 797.8 468.9 328.9
Total assets 1,464.1 1,423.8 40.3
Total equity and liabilities 1,464.1 1,423.8 40.3
Interest Net debt Equity ratio 32% 42% -10%
bearing debt USD Current ratio 0.71 0.99 -0.28
USD 415.9m 116.3m Net interest bearing debt 116.3 64.3 52.1
Interest bearing debt 415.8 289.5 126.3
12The Way Ahead
Icelandair Group will implement a new financial reporting standard
IFRS 16 at the start of 2019
Comments Financial metrics USD‘000 IFRS 16 impact excl. Hotels IFRS 16 impact incl. Hotels
Overview of the estimated impact EBITDA +66,723 +81,427
of the IFRS 16 standard on
Icelandair Group’s consolidated Depreciation -61,720 -72,303
financial statements in 2019, in
the absence of any other Net finance cost -10,679 -18,014
changes, and on the Balance
Sheet as of 1 January 2019.
Net Profit -5,676 -8,890
The impact is shown both
excluding and including Icelandair Total assets 1,432,863 1,745,786
Hotels, which are being divested.
Equity ratio 33% 27%
14Icelandair will take delivery of six B737 MAX in the coming weeks
Aircraft deliveries 2019-2021
An agreement concluded on the financing of pre-delivery
payments on 11 Boeing MAX aircraft. 6
5
Six aircraft scheduled for delivery in 2019 and five aircraft in
3
2020.
3
In all, the financing amounts to USD 200 million over the 2
period. 3 1 B737 MAX 9
2 B737 MAX 8
1
The Company’s cash position increased by USD 160 million
2019 2020 2021
at the end of 2018 as a result of the agreement, as
Icelandair Group had already made pre-delivery-payments
out if its own funds. 11 7
Sale and leaseback arrangements have been concluded for aircraft aircraft
seven Boeing 737 MAX aircraft. Six aircraft scheduled for
PDP Sale
delivery in 2019, one aircraft scheduled for delivery in 2020.
finance leaseback
completed completed
15Capacity increasing by 10% in 2019 – available seats in Europe growing more
than in N-America to correct imbalance from LY
Change in ASK | 2018 vs 2019 forecast Passenger mix | number of passengers in thousands
9.7% +13%
0.7%
4,663
6.5%
4,053 4,135
2.5%
3,679
Byrjun Increased Increased New Total
frequency frequency destinations 36% 36%
3,073
N-America Europe Europe
38%
37%
12% 13%
13%
15%
12%
10% 9.7% To
8% 8% 52% 51%
50% From
49%
Via
Total
Q1 Q2 Q3 Q4 2019F 2015 2016 2017 2018 2019F
16Actions taken to improve profitability in 2019
The performance of Imbalance in Focus on
Implementation of a
Icelandair in 2018 was the Route strengthening
new revenue
Network corrected sales and marketing
unacceptable. management system
activities
A number of actions have
been taken to improve Strengthening of
Increased New connection bank,
processes to reduce
operations in 2019 emphasis which will improve
disruptions in the Route
on ancillary revenue resource utilisation
Network
Improved Domestic
utilisation Outsourcing flight operation under
review
of manpower
17Aim to reduce IRROPS cost by 40% in 2019
On time performance January 2018-January2019
The cost of unpunctuality and disruptions
in flight schedules amounted to
81% 84% approximately USD 45 million in 2018.
80% 79% 79%
78% 78%
The aim of the Company is to reduce this
69% cost at least by about 40% in 2019
69%
67% through:
64%
improved punctuality
55%
changes in the Route Network
infrastructure reinforcements
39%
Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19
IRROPS cost = cost related to Irregular operations 182019 Guidance
International flight operations
Significant improvements in profitability expected in 2019 because of a number
of strategic and operational actions. However because of the greater Worse financial performance
uncertainty in revenue forecasts than before and uncertainty in the labour
market in Iceland, an EBITDA guidance for the year is not issued at this stage.
expected in Q1 2019 than in Q1
2018. Average air fares have not
increased between years, and the
Other core operations timing of Easter will have an
A slight performance improvement is anticipated from other core operations in
2019, which returned USD 37 million in EBITDA in 2018.
impact on demand.
Icelandair Group's long-term
business objective remains
Companies in sales process unchanged, with an average 7%
The sales process of Icelandair Hotels is expected to be finalized in 2019 and it EBIT ratio.
has been announced that the sales process of Iceland Travel is currently being
prepared. The EBITDA of these assets was USD 16 million in 2018.
19Old
Board of Directors
Organisational
Structure Internal Audit
Icelandair Group President and CEO
Corporate Communication Corporate Affairs
Sales and Customer Operations Aviation Tourism
Marketing Experience COO Investments Investments
Finance CCO CXO
CFO
Air Iceland Icelandair
Connect Hotels
People and Culture Loftleiðir Iceland
CHRO Icelandic Travel
VitaBoard of Directors
New Internal Audit
Organisational President and CEO
Bogi Nils Bogason
Structure
Icelandair Group General Counsel Communications and CSR
Finance
Eva Sóley Guðbjörnsdóttir Sales and Air Freight Aircraft
Customer Operations and Leasing and
Experience Logistics Consulting
People and Culture Jens Gunnar Már Árni
Birna Ósk
Elísabet Helgadóttir Þórðarson Sigurfinnsson Hermannsson
Einarsdóttir
Digital Development & IT
Tómas Ingason
Fleet and Network
Ívar S. KristinssonOur mission is clear:
To improve the Company’s profitability
and strengthen the operations for the future
22Disclaimer
| This material has been prepared by Icelandair Group hf. It may include confidential information about Icelandair Group hf. unless stated otherwise all
information is sourced by Icelandair Group hf.
| The circulation of the information contained within this document may be restricted in some jurisdictions. It is the responsibility of the individual to comply with
any such jurisdictional restrictions.
| Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Icelandair Group. Past performance
should not be viewed as a guide to future performance. Where amounts involve a foreign currency, they may be subject to fluctuations in value due to
movements in exchange rates.
| Icelandair Group cannot guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on
sources that Icelandair Group believes to be reliable. Neither Icelandair Group nor any of its directors or employees can however warrant that all information
is correct. Furthermore, information and opinions may change without notice. Icelandair Group is under no obligation to make amendments or changes to this
presentation if errors are found or opinions or information change. Icelandair Group accepts no responsibility for the accuracy of its sources or information
provided herein and therefore can neither Icelandair Group nor any of its directors or employees be held responsible in any way for the contents of this
document.
| This document must not be construed as investment advice or an offer to invest.
| Icelandair Group is the owner of all works of authorship including, but not limited to, all design, test, sound recordings, images and trademarks in this material
unless otherwise explicitly stated. The use of Icelandair Group´s material, works or trademarks is forbidden without written consent except where otherwise
expressly stated.
| Furthermore, it is prohibited to publish, copy, reproduce or distribute further the material made or gathered by Icelandair Group without the company‘s explicit
written consent.
23Icelandair Group Reykjavík Airport 101 Reykjavík Iceland Tel: +354 50 50 300 info@icelandairgroup.is Copyright © Icelandair Group All rights reserved.
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