As Icelandair anticipates a post-pandemic boom in tourism, CEO Bogi Nils Bogason reveals the flag carrier’s growth plans. With a strong foothold in North America and Europe, Bogason hints at eastward expansion. William Hallowell reports
This year Icelandair added three new routes to its transatlantic network with the introduction of flights to Pittsburgh and the Faroe Islands – and a return to Halifax in Canada.
According to Bogason, these destinations are part of the airline’s strategy to increase its network with new routes every year on both sides of the Atlantic. But there are no decisions yet on where Icelandair will fly to next from 2025.
He said: “Pittsburgh is a growing area with not very strong connections to Europe. By providing our service to Pittsburgh, people in that catchment area will have the opportunity to travel to Iceland and our wide network of European destinations.
“We will offer very efficient, one-stop connections from Pittsburgh to Europe and vice versa – and the route has [already] been well received.
“And on the Faroe Islands, we look at the Arctic as our core market. It’s an integral part of our long-term fleet strategy to connect the Arctic, the Faroes, to Iceland and our North American destinations with the strong network we have in Keflavik.
“By our service to the Faroes, we are offering tourists from North America very smooth and easy connections and vice versa.”
Bogason added that Icelandair has a strong foothold in the Arctic, and that the addition of the Faroe Islands to its network is “just a logical step in our strategy”.
The national flag carrier will fly a 160-seat Boeing 737 MAX, predominantly a MAX 8, to Pittsburgh and Halifax, while operating a 76-seat Bombardier Q400 to the Faroe Islands.
Fleet expansion
But to continue the company’s route expansion, Icelandair needs more aircraft. The carrier has an order with Airbus for A321XLRs and LRs and will receive new LRs from lessors later this year. These aircraft will replace the 757s in the airline’s current fleet.
Bogason explained: “LRs can do the same as the 57 can in our current network, but when the XLRs are brought into our fleet we can begin to fly narrowbody aircraft to destinations further away than we are flying today with the 57.
“That opens up new opportunities to connect new dots, shall we say, to our current network – whether it is down the West coast of the US or to the East to Dubai.”
The airline received three MAX aircraft in May and has up to 25 orders for new Airbuses (13 firm orders and 12 options), the first of which will be delivered in 2029.
And it has already secured eight LRs from lessors. The first will be delivered by the end of this year and Icelandair expects an additional four deliveries by spring 2025. A further three are expected by summer 2026.
Bogason added: “That’s how it looks now, but we won’t be placing any more orders for the time being.”
At the beginning of June, Icelandair signed a codeshare agreement with Emirates, and with the new aircraft in its fleet, this “opens up a lot of opportunities for us to develop our network”, the CEO outlined.
“Of course, we have not made any decisions [yet]. It’s a dynamic environment and things change – so when we get closer, we will make a decision on exactly which new destinations to add and at what time.”
Market forecasts
Part of the airline’s rationalisation for fleet expansion now is its forecast for a boom in tourism to Iceland in the next few years. Iceland has witnessed “extremely strong” demand for travel post-pandemic.
Bogason said: “We believe that Iceland, as a tourist destination, has a great future and there are a lot of opportunities [for us] with the exciting and interesting nature and vibrant culture here.
“And the demand into Iceland post Covid has been extremely strong, especially from North America. Last year we saw very strong demand and capacity was above pre-Covid levels.
“But as we announced [at the end of May] we are seeing a little less demand into Iceland now than last year. This year it has been a little bit weaker, and we have been shifting our focus to having a more flexible network, which is a great position to be in.
“As I say, though, long term we firmly believe Iceland has a very bright future as a tourist destination.”
Since the end of the pandemic, Icelandair has seen demand return from Europe, particularly in the UK, which is important for business during winter. Even demand from Asia is back up.
With its codeshare agreements with Emirates and Turkish Airlines, Bogason outlined that the airline has a strong foothold into Asia and the Middle East, which Icelandair operates in even if it doesn’t fly directly to these markets.
“We will see a strong flow from those areas into Iceland going forward,” he said.
Growth plans
What of Icelandair’s market expansion plans, though? The airline already has a significant presence in North America and Europe, with intentions to increase its transatlantic route network. The CEO also hints at possible expansion towards the East.
Bogason told ARGS: “In the near future, we’ll only be focusing on growing into Europe and North America and gradually building our destinations in the coming years on both sides of the Atlantic.
“At the same time, we’re going to increase frequency to existing routes and develop the back structure here in Keflavik. That’s our growth plan for the coming years.
“And with the codeshare agreements that I mentioned, we have a very strong platform [to use] before we can fly there directly ourselves.”
With the expansion of its fleet from now up to 2029, Bogason hints at opportunities to fly directly to Middle Eastern destinations.
Last year, Icelandair set out its plans for the next 13 years. In 2037, the airline will be marking its 100th anniversary, by which time it expects to be operating up to 100 aircraft – more than double the roughly 40 aircraft it flies today.
“However, the annual growth we’re forecasting for the next 13 years is slower than what we saw in the last 13 years. We’re assuming 5 to 7% annual growth for the next decade or so. That’s how we’re building our plans,” said Bogason.
Moving forward: “We are focusing on our core markets in North America and Europe, and we will continue to do so. This is where we see the main growth for our business.
“But by developing partnership agreements with the airlines in Asia and the Middle East we will have a stronger foothold there and for growth there in the future.”
Financial results
In July, Icelandair reported encouraging financial results for the second quarter, with earnings before interest and taxes (EBIT) at US$3.3 million and net profit at $0.6 million on a capacity increase of 8%.
According to aviation analytics company Cirium, Icelandair was the most punctual carrier in Europe in June. It carried 1.2 million passengers through Q2 2024, despite witnessing a decrease in passenger unit revenue due to softer demand for air travel to Iceland and increased competition in the transatlantic market, the airline said.
Commenting on the results, Bogason said: “Our flight operations are performing well, on-time performance has been outstanding for five months in a row and Icelandair was named the most punctual airline in Europe in June.
“It is great to see that our focus on increased efficiencies is already paying off, as reflected in decreased unit cost in the second quarter, despite high inflation and cost increases.
“We have also continued improving the performance of our cargo operation, and the leasing business continues to perform well, as well as our domestic operation. This success is thanks to the united effort of our employees across all divisions.”
He added: “Demand in the tourist market to Iceland has not been as strong as last year but we have been successful in leveraging the flexibility of our route network to maintain an acceptable load factor by placing a stronger emphasis on the transatlantic market.
“This change in the passenger mix, however, impacted yields and therefore our unit revenue in the second quarter.”
