Strong Demand and High Yields Lift Iceland’s National Airline
Pushing Back: Inside the Issue
We’ve now reached the point where most major airlines have published their first-quarter results. Singapore Airlines was among the carriers reporting last week, joining several other East Asian airlines near the top of the worldwide margin rankings. Its excellent 16 percent operating margin highlights Asia’s belated but now strong demand recovery, as well as the carrier’s own efforts to lower costs while the Covid crisis was playing out.
Singapore Airlines is of course a celebrated company with a storied past. But other Asian carriers like Philippine Airlines and Eva Air also unveiled doubled-digit first quarter profit margins. Remember too that Thai Airways produced stunningly high margins — the best first quarter margins of any airline in the world, in fact. In India, meanwhile, the domestically dominant IndiGo fared well, as international temptations beckon. EasyJet and Aegean will have no problems filling planes and collecting fat yields this summer. Azul is making money selling tickets, loyalty points, tour packages, cargo, and soon maintenance services. But all of its profits and then some are going straight into the pockets of lenders and suppliers — an out-of-court restructuring of these obligations is underway.
At an investor event, several U.S. low-cost carriers, along with Air Canada, gave detailed updates on current demand conditions. Air Canada’s rival WestJet, for its part, reached a tentative new contract deal with its pilots but not before having to pre-cancel flights in advance of a threatened strike. American too, reached a tentative agreement with its pilots.
But American is also feeling blue, specifically about its alliance with JetBlue — the two airlines need to stop cooperating, said a court, handing a victory to the U.S. Justice Department. Next big question for JetBlue: What will the courts say about the DOJ’s attempt to torpedo its takeover of Spirit Airlines?
Weekly Skies
Singapore Airlines, one of the world’s most esteemed airline brands, wasn’t all that esteemed in financial circles last decade. Not that it ever lost money. But the commonplace double-digit operating margins of its past ended in 2010. During the next four years, margins wallowed between 1 percent and 3 percent. Things steadily if modestly improved after the oil crash of 2015, and operating margin reached a post-2010 high of 7 percent in 2019. Then came the pandemic losses — mitigated some by cargo strength — but also generous government aid and thorough cost restructuring.
When passenger demand began reviving in mid-2022, Singapore Airlines was once again earning impressive profits — some of its highest profit margins ever, in fact. In the just-completed first quarter of 2023, the airline’s operating margin was 16 percent, consistent with a common theme across much of East Asia: Airline profits are soaring, outside of China and Japan anyway, where the comeback has thus far proved more muted. Singapore Airlines deserves credit for re-hiring and recruiting new crews even before Covid travel restrictions were lifted, ensuring it was ready to take advantage of the demand revival as soon as it started. The company continues to report strong passenger demand across all cabins going into the northern summer season, though cargo demand has become “not great.”
Strategically, the airline is placing a big bet on India by purchasing a 25 percent stake in the new Air India, which will incorporate Singapore’s current Indian airline Vistara. It’s “extremely excited” about the reopening of the China market, which will strengthen as the holiday tour operator market ramps up. It’s surely disappointed by Boeing’s 777-9 delays but will lengthen leases on 777-300ERs to compensate. It also downplayed the impact of engine issues at its low-cost subsidiary Scoot, which flies Pratt & Whitney-powered Airbus A320neo-family aircraft. Scoot, by the way, will soon start flying Embraer E190-E2s. Collectively, Singapore Airlines and Scoot are still flying less capacity now than they were in 2019. But they’re hoping to pursue longterm growth as Singapore’s Changi airport opens both a fifth terminal and third runway in the years ahead.
India’s IndiGo Targets 100 Million Passengers
Not yet 20 years old, India’s IndiGo has grown to become a colossus in its giant home market, assuming a role not unlike Southwest in the U.S. According to Diio by Cirium data for the current April-to-June quarter, IndiGo now flies more seats and operates more flights than even Turkish Airlines or EasyJet. But this might just be a preview of bigger things to come. Clearly, IndiGo has the itch to go longhaul, if not quite yet ready to commit. It’s already dipping its toe in the waters by operating leased Boeing 777s from Turkish, itself partnering with IndiGo to gain more access to India’s fast-growing market. IndiGo is also codesharing with other carriers, including American, Qantas, Virgin Atlantic, Qatar Airways, and Air France-KLM — IndiGo’s CEO Pieter Elbers held the top job at KLM for many years. Regarding its international ambitions, Elbers said in the LCC’s calendar first-quarter earnings call: “As time will progress, we’ll evaluate some of these possible new opportunities.” The airline has long been attacking international markets within narrowbody range, and international markets happen to be outperforming their domestic counterparts at the moment, broadly speaking. They tend to have lower unit costs after all, because stage lengths are longer on average.
Overall, IndiGo produced a solid 8 percent operating margin last quarter, which follows an outstanding October-to-December quarter. It’s now dabbling in cargo freighters and intends to improve its loyalty plan. As longer-range Airbus A320neo-family aircraft arrive, new low-risk international opportunities beckon. IndiGo’s A320neos and their engines, to be sure, have created Taj Mahal-sized headaches for IndiGo. But an airline that’s gained so much scale and clout has the flexibility to source acceptably-priced substitute capacity when needed.
IndiGo is nothing if not a survivor, outliving a parade of hapless rivals from Kingfisher to Jet Airways to most recently GoFirst. It naturally has close eyes on Air India as it attempts to become a reputable competitor with support from Singapore Airlines. Newcomer Akasa Air too appears hungry to grow. But IndiGo is certainly not intimidated. It’s targeting to move no fewer than 100 million passengers this fiscal year (wow!) and trumpets itself as India’s leading airline. “Our philosophy here is, wherever you have to go in India, you have to go IndiGo. That’s precisely our philosophy, India by Indigo.”
More First-Quarter Earnings…
- In mid-April, EasyJet disclosed its financial results for the six months between October and March, its offpeak winter half. Recall that operating margin for the period was negative 15 percent. Last week the carrier held a call with investors to provide more detail about the half, and about what lies ahead. Critically, the airline has finally put an end to massive operating losses in Berlin — more than $100 million in 2018 and another $100 million-plus in 2019. Doing so involved major capacity cuts in Germany. But other areas of the network are growing, notably busy beach markets like Portugal, Greece, and Egypt. EasyJet is expanding from the UK as well, in part with more domestic flying in the wake of Flybe’s demise. More importantly, though, management says outbound leisure demand from the UK remains strong despite the country’s economic misfortunes, with Brits now prioritizing their summer holidays, even ahead of home renovations and dining out at restaurants. Along with the strong demand environment, EasyJet sees revenue growth potential from its profitable Holidays division (a tour operator), its ever-improving ancillary prowess, and its more reliable operations. Cheaper fuel and a weaker U.S. dollar certainly don’t hurt. But what about the competitive threat from the ultra-LCCs Ryanair and Wizz Air? Not to worry, executives assured: “Ryanair is adding 10.5 million seats this summer, Wizz was adding 5.8 million seats this summer. Of the Ryanair capacity, 1.1 million is head-to-head with us. Of the Wizz capacity, actually, it’s a reduction of 400,000 seats with us. So net, if you combine the two, it’s 700,000 extra seats on our 56 million seats for this summer. That’s 1.25 percent. So actually, they are growing, but they’re not growing on our network.”
- In Europe, Greece’s Aegean Airlines limited its first-quarter operating losses, ending with a margin of negative 6 percent. That’s perfectly acceptable for what’s a super-seasonal airline. The Greek economy, mired in a deep depression a decade ago, is benefitting from strong tourism, even in the absence of Russian arrivals. And so is Aegean, an airline that’s held its own against low-cost carriers like Ryanair and Wizz Air. This summer, Aegean is offering 16 new destinations, including several in the Middle East. Notice, by the way, how European carriers are becoming more and more active in the Middle East, aided by longer-range narrowbodies.
- Like its rival Gol — which likewise managed to avoid bankruptcy despite a lack of pandemic-era government support — Azul is currently producing impressively high operating margins but also worryingly high net losses. The Brazilian carrier, launched by JetBlue founder David Neeleman 15 years ago, simultaneously managed a positive 10 percent operating margin and a negative 16 percent net margin. The red ink stems from heavy interest payments on debt that accumulated during the pandemic and swelled further because of a weak Brazilian real. Just last quarter, Azul incurred $230 million in interest payments. Mercifully, air travel demand in the Brazilian market is currently strong, with yields elevated by limited competition — just three main airlines now prowl the Brazilian skies (Azul, Gol, and Latam). Azul is also enjoying newly-won slots at Sao Paulo’s downtown Congonhas airport, plus a wellspring of profits from auxiliary businesses, specifically a tour operator, a loyalty plan, and a cargo/logistics business. One fun fact mentioned in the carrier’s first-quarter earnings call: Azul’s tour operator has become the largest seller of Disneyworld tickets in Latin America. The company is now launching a maintenance, repair, and overhaul (MRO) shop, “Azul TechOps,” which will insource work from other airlines. It’s great timing, given the worldwide shortage of MRO capacity. At the airline itself, fleet renewal is a major theme, with more A320neos and Embraer E2s on the way in, and first-generation Embraer jets on the way out. What investors are most concerned about, however, is its debt, which Azul reassuringly says will drop sharply thanks to new agreements with Airbus, Embraer, and lessors. The next big step is securing agreements from bondholders. “I would just like to remind everyone,” said the Azul’s CEO John Rodgerson, “that we’re returning our leverage to 3x in 2024 without any government support, without using bankruptcy or other judicial restructuring processes, and without imposing a haircut on our creditors as other airlines around the world did.”
- How long will Asiana remain an independent airline? Its pending takeover by Korean Air remains subject to foreign scrutiny, and the EU for one said last week it has some reservations. For now, the independent Asiana is enjoying the post-pandemic Asian upswing, earning a 6 percent operating margin in the first quarter. That, however, is less than half the 13 percent Korean Air managed in the same quarter. Believe it or not, Asiana reported a 15 percent operating margin during last year’s first quarter, when passenger markets were still largely closed — the cargo boom explains why. Cargo is now much weaker, but passenger demand is back with a vengeance. Separately, the independent Korean LCC Jeju Air reported as well last week. Its operating margin was an impressive 17 percent. That suggests Korea’s domestic and shorthaul international markets (specifically, Japan, greater China, and Southeast Asia) are currently thriving.
- Skymark, a Japanese LCC, eked out a positive 0.2 percent operating margin for the year’s first quarter. It’s an airline with a checkered history, at one point recklessly ordering A380s. Before long it was bankrupt but saved from oblivion with financial help from Airbus (All Nippon stepped in as a shareholder as well). It’s now back on the Tokyo stock exchange, hoping to compete in the Japanese domestic market. This time it’s being responsible and taking Boeing 737 Maxes, including eventually -10s — no more widebody pretensions. One current tailwind is the preference of many would-be Japanese international tourists to travel within Japan instead, a trend Skymark attributed to the weak yen and high inflation abroad. Japan’s government, furthermore, is subsidizing domestic tourism to help revive the sector. The airline also hopes to win more slots at key airports including Tokyo Haneda, Kobe (near Osaka), and Fukuoka. For its full fiscal year that just began in April, Skymark is forecasting a 6 percent operating margin.
- A few other first-quarter earnings updates from around East Asia: VietJet, a fast-growing LCC, returned to the black with a 2 percent operating margin. More interestingly, Philippine Airlines continues its remarkable turnaround, echoing that of its regional rival Thai Airways. Both were bankruptcy-plagued loss-makers before the pandemic but extraordinarily strong profit producers now. PAL’s March quarter operating margin was — wait for it — 18 percent. In Taiwan meanwhile, Eva Air greatly outperformed China Airlines, 14 percent versus 4 percent. Eva’s significantly greater North American exposure was presumably helpful. Both Taiwanese carriers, by the way, are dealing with a well-funded new rival — Starlux — intent on grabbing a piece of Taiwan’s longhaul market; Starlux is now offering nonstops to Los Angeles.
- TAAG, the national airline of Angola, cut its losses from roughly $300 million in 2021 to more like $60 million in 2022. The carrier has ambitious plans to grow its fleet from 20 to 50 aircraft in the next four years, supported by new partnerships with carriers like Iberia and Gol. Angola is an oil-rich nation with linguistic and thus economic links to Portugal and Brazil. Note that IATA will hold a Focus Africa conference in Addis Ababa next month, addressing the market’s opportunities for airlines. As IATA said: “Over the next 15 years, Africa’s passenger traffic is expected to double. The continent stands out as the region with the greatest potential and opportunity for aviation. But this potential is limited by infrastructure constraints, high costs, lack of connectivity, regulatory impediments, slow adoption of global standards, and skills shortages, among other factors.”
First-Quarter Earnings Scoreboard
- Keep seasonality in mind as you look at these figures. Note for example that the first quarter is peak season in Thailand (not to mention Florida where Sun Country prowls) but offpeak in most major markets.
- Ranked by operating margin excluding special items.
Bank of America Transportation Conference Highlights
- Alaska Airlines: “At least through this summer, we’re going to have really strong demand.” So said Alaska’s Chief Financial Officer Shane Tackett, echoing a common sentiment across the airline industry. Most businesses (especially smaller businesses) are traveling in full force, and leisure travel is so good this year that Alaska regrets not flying more capacity last quarter to popular vacation spots. Some of Alaska’s best markets right now include Latin and Central America, the state of Alaska, and Florida (which it serves trans-continentally from West Coast gateways). Hawaii demand is strong, though competitive capacity is elevated (Southwest is now a major player). Business conference travel to places like Las Vegas and San Francisco is coming back. Most importantly, outbound demand from the airline’s Pacific Northwest strongholds is strong — from Seattle for sure and even from Portland, Ore., despite post-pandemic economic woes for the city’s downtown core. There are, however, some exceptions to the rosy demand story. Alaska still sees weakness among West Coast tech giants, whose travel remains “still pretty depressed,” down some 40 to 50 percent from 2019. In a related trend, Bay Area transcontinental flying has been among the least recovered segments for the airline. Tackett separately spoke about the demand help Alaska is receiving from its American and Oneworld partnerships. He denied any major disruption concerns regarding Boeing and its Max deliveries. And regarding possible structural shifts in demand patterns, like people flying more on certain days of the week than before, he’s “not ready to declare any new normal.”
- Frontier Airlines by contrast is convinced that unit revenues have become much stronger on peak days and much weaker on offpeak days. “What we’ve seen is in the off-peak periods, the difference between peak day RASM [revenue per available seat mile] and off-peak day RASM has grown. It’s grown from peak days having a 19 percent unit revenue premium … to a 26 percent premium,” Vice President of Commercial Daniel Shurz said. In response, Frontier is adopting more accordion-like schedules, flexing capacity up and down depending on the day of week. That’s harder to do operationally on longer-haul transcontinental routes, so it’s dropping some of those. Schedules are also becoming optimized for operational reliability, which has indeed improved in recent months. Frontier insists that its ultra-low-cost carrier model still works, dismissing a growing chorus of skeptics who say supply-side shortages will create barriers to one of the model’s essential ingredients: rapid growth. Shurz highlighted, among other things, the carrier’s large Airbus orderbook and growing ancillary revenues — it’s on track to reach an average of $85 in ancillary revenue per passenger. He asserts that Frontier is still the lowest cost producer in the industry, never mind the upward unit cost pressure from operating fewer longhaul flights and prioritizing reliability. Yes, demand is healthy, so much so that it’s the first time Shurz can remember, in his 20-plus-year career, that as fuel prices increased, “we were able in the industry to get revenue to go up enough to more than cover [the added expense]. He specifically mentioned strength in shorthaul international demand, which includes a lot of family visit traffic. He also cited Puerto Rico as a market that’s currently thriving. Dispelling the notion that ultra-LCCs are flying Walmarts, catering to America’s poor, Shurz said more than half of Frontier’s customers have household incomes above $100,000. (Median household income in the U.S. is about $70,000).
- Sun Country’s Chief Financial Officer Dave Davis said average income across all his customers is “a little south of $100,000 a year.” He said peak versus offpeak RASM differentials by day of week are about 25 percent. Like Allegiant, Sun Country practices an extreme form of accordion scheduling, with offpeak capacity roughly half what it is during peak periods. Davis separately said pilot attrition rates have dropped sharply since signing a new pay contract. Demand to Florida, he added, is almost insatiable. And in east coast markets like New York and Boston, he suspects that “legacy fares have gotten so high that small businessmen are trading down to us and flying on us.”
- Air Canada’s outgoing Chief Financial Officer Amos Kazazz expressed the challenges of cost inflation, as well as the difficulties of demand forecasting. A new distribution strategy should help some on the cost side. On the demand side, strength is visible across all geographies through the summer, and even into the fall. Booking curves, he said, are normalizing. But one thing Air Canada will be watching closely is whether premium demand stays strong if the economy weakens. Kazazz downplayed the threat of Canada’s crop of young low-cost carriers, insisting Air Canada has the tools to effectively defend itself.
Feature Story
Q&A With Icelandair CEO Bogi Nils Bogason
It’s easy to get distracted in Icelandair’s Reykjavik headquarters overlooking the runways at Reykjavik’s downtown airport. The occasional departing De Havilland Dash 8, soaring up over the city, immediately catches one’s eye. But Icelandair CEO Bogi Nils Bogason is seemingly immune to such distraction — as one would be after seeing it day in and day out — on a recent sunny May afternoon in this Nordic capital.
No, Bogason is serious about the airline he has led since 2018, and for good reason. Despite strong demand and historically high yields, Icelandair has only just turned around after several years of losses that pre-dated Covid. The carrier generated a 1.5 percent operating margin last year, and is on track to a 4-6 percent result this year — a level of return it has not achieved since the middle of the last decade. Why? Yields, mostly.
Bogason sat down with Edward Russell in Icelandair’s mid-century modern headquarters building to discuss what’s going right for Icelandair, and why he can’t put the threat of high inflation out of his head. The interview has been edited and condensed for clarity.
Airline Weekly: In April you said summer bookings were very strong, is that still true?
Bogi Nils Bogason: Yes, it’s still true. The booking flow is strong and, looking at the next six months, the bookings are 40 percent stronger than last year. So yes, the demand is still very strong.
AW: And to North America?
BNB: The flow from North America to Iceland and to Europe is still stronger than vice versa. But we are in a good position because we can shift our focus when things change, when the dynamics change. If the euro will become stronger against the dollar, we can shift the focus more to Europe and so on. And so that’s a good position to be in.
AW: Icelandair will fly its largest summer schedule ever this year, yet capacity is down compared to pre-pandemic. What’s happening here?
BNB: The reason is that we have been adding a lot of [737] Maxes to our fleet, and phasing out 757s. If you compare our fleet now to what it was pre-Covid, where we only almost only had 757s and 767s, we will operate 18 Maxes this summer and the Max aircraft has fewer seats. So when we say that the summer will be our largest ever, we are talking about in terms of destinations and frequency, but ASK [available seat kilometers] is a bit lower because we have smaller aircraft on average.
AW: Is Icelandair hit by Boeing’s delivery delays this summer?
BNB: We will operate 18 Maxes, and in total 34 aircraft in the international passenger network. We also
have 13 757s and three 767s in the fleet, I think that is total 34. We are not expecting any deliveries of new aircraft for the summer from Boeing, we are taking some Maxes for the summer from a lessor. But next winter we are going to add two more Maxes that we have already secured, and there are some delays there but it’s not impacting us for this summer.
But we are seeing what everybody else is seeing. The supply chain is a bit slower than pre-Covid, and so
we are seeing some issues for the spring for the wrap up [May to June period], which we have taken care of now. We have leased in one aircraft for just two weeks because of that.
AW: You recently said high inflation would impact travel demand “one way or another.” Tell me a bit more about your concerns.
BNB: No, not yet. Just history tells us that when costs are going up everywhere people start to spend less on some things — when groceries are going up, heating the houses are going up, and electricity is going up. This is just what we have seen in the past. So we are expecting that the inflation will impact demand in the end, but we have not seen it yet in our bookings. Where it will start, we don’t know and we are just ready for that. But still the demand is very strong.
But we can say on the other side, we could say that Covid taught the world that we would like to travel, we would like to meet friends and families and we would like to experience something instead of staying at home. So maybe what has changed will mitigate the impact of inflation — that people are prioritizing, they’re spending differently than historically and all our industries will just have to see how this will play out. But as I said, the history tells us that inflation will, in the end, impact the demand for most industries.
AW: Icelandair forecasts a 4-6 percent operating margin this year, a financial result it has not achieved since 2016. What’s driving the strong numbers?
BNB: That is actually below our long term EBITDA margin goal, which is 8 percent on average over the cycle. And you are completely right, there are quite a few years since we were able to generate that high EBITDA. But if you look back, Icelandair was doing very well in 2015, 2016, and 2017. But 2018 was the first year of loss making. And during those years the competition was very strong now, and we are operating in a very competitive environment. But in 2018, we were competing with Wow Air.
Wow ended up in a bankruptcy, and they were just trying to survive and fill the seats for very low prices. And that was very challenging environment for us because they had grown a lot. They were up to almost the same size as us, and not selling the seats for sustainable prices. So the competition affected our operations a lot. You can say irrational and sustained competition affected us a lot in 2018.
We also made some mistakes in our operations. How we managed the network, some decisions in the sales and marketing functions and so. And our CEO at that time resigned because of that. Then, in 2019, we were doing much better, and in the first quarter and we were in control, let’s say, of our operations. But then the Max grounding happened, and that impacted us a lot because the Max was supposed to be a big part of outreach in summer of 2019. So that cost us a lot of money. Then Covid happened. So that has been the last few years.
AW: You’ve mentioned it is still a very competitive environment, plus you have a new competitor, Play, launched by many former Wow executives. What is the difference today?
BNB: It is a very competitive environment, and we do welcome the competition. We are competing with Play but there are probably 26 other airlines flying to and from Iceland during the summer, and many of them flying throughout the year. So as before, the market here is very competitive and dynamic, and we just love that. We definitely respect the competition. Play is doing very well on the operational side, and so we respect the competition. That is just how the industry is — it is very competitive.
AW: What I’m trying to get at is how, with the competition, can you achieve 6 percent, 8 percent margins where you could not before?
BNB: There are a lot of things to it. We are doing quite well on the operational side. We have been focusing a lot on on-time performance, and we’ve seen a big improvement there. Of course, we are operating out of Iceland, which can be challenging during the wintertime. And then on the revenue side, we have been doing very well. We have been able to increase our unit revenues, which is very important because we are operating out of Iceland.
We are a small airline. We will never be able to get up to the economy of scale of like EasyJet or many of the other players that we are competing with. We have high living standards in Iceland, and we are paying high salaries. So we know the environment that we are operating in and because of that it’s very important that we are able to improve and increase unit revenues. And we have been able to do that, and we have been focusing a lot on strengthening the infrastructure there. Iceland over the decades has built up a very strong infrastructure on the commercial side. The Iceland brand is very well known in all our markets, even though we are very small, we have very strong sales and marketing sector.
We partner with airlines like JetBlue on the east coast of the U.S., and Alaska on the west coast. So we’ve been building up partnerships like that, and that is helping our revenue generations a lot. And we are feeding into their networks and they to ours. Then we have been focusing on improving our structure regarding network management and revenue management, and investing a lot there. The revenue generation that we have been seeing both last year and during the first quarter this year, I think they depict that we have been making the right decisions.
AW: Speaking of partnerships, would Icelandair consider joining an alliance?
BNB: We consider that every third or fourth year quite thoroughly. We probably did that the last time three or four years ago, it was pre-Covid if I remember correctly. But the conclusion has always been to stay out. We are operating a unique network here in the middle of the Atlantic, and the conclusion has been to stay out of the alliances and focus on partnering with airlines like JetBlue, Alaska, and SAS.
AW: Icelandair recently announced a major order for Airbus A321XLRs to replace its 757s. Why the XLR?
BNB: Yeah, so long story short, we have known for quite a few years that we have been the need for a full replacement for the 757 was coming up. And in 2012, we made the decision to go for the Max, and the Max has been doing extremely well in our network. Fuel efficiency, range, price, and so on. However, we needed the full replacement for the 757. Around two years ago, we went into a big project where we were analyzing and working on our long-term fleet strategy, what options do we have for our network, and so on. The conclusion was that we had two good options in front of us for our long-term fleet: One was just to keep the Max as a core aircraft in our fleet, and operate a few widebodies with the Max, the 767. And the 767 might be replaced with the 787 long term.
The other option was to start to introduce Airbus A321LRs and XLRs into our fleet. With those two options on the table, we set up a campaign between Airbus and Boeing, and the conclusion was the deal with Airbus. And there are of course endless things that come into a decision like this. Passenger comfort, how we can develop our network, transition cost, training cost, and then the whole financial motor and taking everything into the account. This was the decision.
One important factor is having an aircraft, a narrowbody aircraft, because the key of our business model is to operate a narrowbody aircraft between the continents. Why Iceland? Definitely we are using some 767s. But that is mainly where we have slot restrictions at some airports, and we need bigger aircraft. But the key to our business model is to operate narrowbody aircraft between the continents via Iceland, and having an aircraft that can do everything that the 757 can do and more creates a lot of opportunities for our network. That was of course a big factor.
AW: What new markets could the A321XLR open for Icelandair?
BNB: We had San Francisco in our network on the 767 but we can do San Francisco on XLR. So a narrowbody aircraft to the West Coast — Los Angeles, San Francisco, Houston, Phoenix — there are a lot of opportunities there. And then Dubai [to the east]. But we have not made any decisions. Those are longer term possibilities. We are just focusing on the network for this year and next.
AW: Any updates on the four XLRs Icelandair plans to lease for delivery in 2025?
BNB: It is in the final stages.
By the Numbers
After four straight years of operating losses, Icelandair returned to profit last year. But it’s still a long way from where it was in the mid-2010s.
Source: Airline Weekly analysis and company reports