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Icelandair’s Fate Uncertain as Its Home Country Opens Up
The government of Iceland has announced that it expects to start easing restrictions on international arrivals no later than June 15 with the condition that arriving passengers go into a two-week quarantine upon entry, undergo a coronavirus test or have a clean bill of health from their country of origin before they can go about their normal day-to-day activities.
Having the largest share of flights to and from Iceland, tourism in the country and export or both goods and services highly rely on Icelandair’s route system, for which Keflavik Airport serves as a central hub for flights between North America and Europe. However, in the midst of the coronavirus crisis, the company is taking dramatic measures to survive.
The Icelandic flag carrier had to reduce the working hours of 95% of its employees and has recently requested that the remaining full-time staff take on a 10% pay cut or 10% drop in hours for June and July. According to the proposal, the salary of the company’s board will be reduced by 30 percent, and the salary of the CEO will fall by 25 percent.
“Icelandair Group has taken extensive measures over the past two months which have resulted in significant layoffs and changes in the company’s organization,” the airline said in a statement published on its website. “At the same time, the company has placed a strong emphasis on maintaining basic operations in all areas and thereby ensuring the necessary flexibility to respond quickly as markets re-open and demand for flights and travel forms. In May, the vast majority of the company’s employees have been in a reduced employment rate in accordance with the government’s partial compensation scheme. Others have been in full-time employment with reduced wages.”
The state’s partial financial support will no longer apply to Icelandair Group’s operations as of June 1, except for Iceland Travel.
Bogi Nils Bogason, CEO of Icelandair Group, said that in order to be able to prepare and start a full-fledged offensive, the company needs cooperation from top to bottom.
“There are many angles to look at as preparation for the country’s opening up requires a lot of work on flight planning, sales and marketing, services and the implementation of quarantine,” Bogason said. “At the same time, there has been an increase in freight and charter flights, as well as maintenance of the part of the company’s fleet that is detained. In addition, many departments are involved in the work that is currently in full swing due to the company’s financial restructuring. We want to have as many full-time jobs as possible and hope that workers will meet our request for a reduced wage or employment rate while we get over the most difficult job. ”
In order to overcome the crisis and prevent the airline from connecting the island with the world from going bankrupt, Icelandair Group shareholders granted the board of directors with authorization to increase the company’s share capital by up to 30 billion króna ($209 million).
The board’s goal is to finalize agreements with numerous parties by June 15, including agreements with authorities regarding the security of loans, with creditors, lessors and sellers, as well as with Boeing regarding the 737 MAX jets, grounded since March 12 last year.
Wage agreements have been signed with pilots and mechanics, while negotiations with flight attendants are still ongoing.
“I believe we’ll be able to reach an agreement with flight attendants in the coming days,” Bogason stated at the shareholders’ meeting.
While the management group is struggling to save the airline, the country’s Minister for Finance and Economic Affairs, Bjarni Benediktsson, says a new airline will have to rise from the wreckage of Icelandair if the company goes bankrupt. Benediktsson said that if Icelandair could not be saved, a new airline needed to be built that could fulfill the role of its airline with Keflavik Airport as the center of international aviation.
“However, the big challenge facing us collectively is that this attempt is to rebuild a company that can fulfill this important role with Keflavik Airport as a connecting airport across the North Atlantic. There must be many scenarios to be considered in that context and hopefully, those will be raised by those who intend to bring capital into it from the private sector,” Benediktsson said.
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