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Air iceland

Operation

travel_tourism_totalpassengAir Iceland is a market-driven service company offering eight scheduled domestic destinations, as well as routes from Iceland to the Faeroe Islands and Greenland.

In total, around 430,000 passengers were carried on Air Iceland flights in 2007, an increase of 14% from 2006, which is the highest number ever in the history of the company. The total turnover of the company increased by 6% in 2007 from the previous year, and the company is showing positive results for the 6th consecutive year. About 90% of the company‘s passenger traffic on scheduled flights is on the routes between Reykjavík, Akureyri, Ísafjördur and Egilsstadir, with Akureyri being the most popular destination with around 200,000 passengers, followed by Egilsstadir with around 134,000 passengers and Ísafjörğur with around 47,000 passengers. Air Iceland carried around 22,000 passengers to Vestmannaeyjar in 2007. In October Air Iceland renewed the contract with the Icelandic Government for flights to Vestmannaeyjar and now holds the contract until the end of 2009.

travel_tourism_plane3The purchase of two 37-seat DASH 8 aircraft in 2006 is giving Air Iceland new opportunities to develop the route structure to/from and within Greenland. A new route was opened up between Keflavik and Nuuk, linking Iceland directly with the capital of Greenland. Operating during the summer of 2007 from mid June until the end of August, the route was immediately successful. A big part of this success came through a code-share agreement with Icelandair, which is the first code-share agreement Air Iceland has concluded with its sister company Icelandair. Other destinations offered in Greenland were, as before, Kulusuk, Constable Point and Narasarsuaq. Another new route was opened up by Icelandair offering flights between Akureyri and Keflavik, linking Northern Iceland with the hub in Keflavik; this route was operated by Air Iceland on DASH 8 aircraft.

In October 2006, Air Iceland entered into a 6-month lease contract with the Maltese company Medavia for one DASH 8 aircraft in Libya. The aircraft re-entered Air Iceland’s operation in May 2007. In November 2007, Air Iceland entered into a 6-month dry-lease contract with the Swedish company Skyways for one Fokker 50. These contracts are a lucrative addition to the winter operations of Air Iceland, as they help to even out seasonality in the operation. The company operates six Fokker 50s, two DASH 8 aircraft and two smaller DHC-6/Twin Otters. In total the company’s fleet consists of ten aircraft.

Markets

Air Iceland holds a very strong position in the Icelandic domestic market and has operated with healthy profits over the past few years. With the strong economy and largescale industrial projects in East Iceland, demand has been high on Air Iceland’s main routes. With around 80% of Air Iceland’s customers having purchased their trips on the company website, Air Iceland has reaped benefits from its extremely effective distribution system, which is important in a competitive environment where time and money play a significant role in customers’ decisions.

Outlook

Air Iceland plans to grow and increase its profitability by offering the Icelandic market, and the tourism market in Iceland and Greenland, the best possible service. Demand is, however, expected to decrease on the routes to East Iceland as industrial projects are coming to an end. Expectations are that other routes will be growing and demand, particularly on the routes offered to Greenland, will be increasing. Based on its success in 2007, the route between Keflavik and Nuuk will be offered from the end of May until the beginning of September.

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