Airline Joins Exclusive 'We Made Money' Club

Icelandair's rapid cost-cutting maneuvers and stepped-up penetration of key markets in the post-September 11th aviation marketplace were cited as major contributions leading to increased profits for the airline and its parent company Flugleidir for FY2002, according to an announcement from Icelandair's Head Office in Reykjavik.

"Icelandair employees have worked as a team on the changes that needed to be made to its operations," said Sigurdur Helgason, President and CEO, "securing a major turnaround in the operation, which is crucial for shareholders and for employees, and laying a firm foundation for the company's future."

In response to the team effort, Flugleidir awarded each employee in the workforce of more than 2,000 worldwide with shares of the company's stock, currently valued at ISK 50,000 (about $550 US).

Over the years, Icelandair's success in the international marketplace has been based on a few key elements that run like a common thread through the company's history. These include freedom of competition and access to markets, the creation of an operating environment that ensures the flexibility necessary to adapt to changing external conditions, an educated management and workforce, and a corporate culture that is open to new opportunities and that encourages its employees to exploit them.

The events of September 11, 2001, however, provided a telling lesson in how external events can affect Icelandic business, communications, and the nation's way of life.

Earlier that Fall, Icelandair had implemented a strategic plan designed to tackle the problems faced in international aviation operations due to weak markets and the unfavorable development of various peripheral operational factors.

How they did it:

Although the airline's roots lay in the buildup of operations, several things contributed to the overall turnaround after September 11. All international flight services had been transferred to a single model of aircraft, new employee contracts were already in place and organizational reforms were well in progress.

By pulling out of unprofitable markets and focusing on cutting costs in all operating units, as well as emphasizing sales to Iceland, Icelandair ultimately proved better prepared than many other airlines in Europe and North America.

"The United States/Canada is a very important market for Icelandair, providing a substantial share of the company's overall ticket revenues in 2002," said Gunnar Eklund, Icelandair's General Manager - The Americas. "In addition to meeting our overall revenue expectations, other key objectives were also well achieved, in spite of the difficult market conditions for transatlantic travel. It is particularly encouraging to note that destination Iceland was much less affected by the 2002 market situation, resulting in similar revenues from the United States/Canada to Iceland as in the years 2000 and 2001." This, he said, was despite substantial capacity reductions in some months.

Icelandair's Helgason described the turnaround in operations in 2002 as unique in the company's history. "Had the development of the country's air transport system been dictated solely by global market forces," Helgason said, "Iceland would be treated as a far-flung outpost of a major international carrier, which might provide flights once or twice a day to a hub of its choice." He added, "Icelandair's size and flexibility enabled the company not only to deal with sudden changes but also to achieve significant reductions in operating costs without affecting our travel operation or services to our home market."

In the years that have passed since Icelandair made the transition from airline to full-service travel operator, tourism to Iceland has grown almost beyond recognition. From 1993 to 2000, the number of visitors to the country doubled, while foreign currency earnings from tourism rose by almost 40%.

Icelandair's primary focus in future strategies is to cut costs at all operating units and, above all, in international aviation. Work is also under way to boost revenue formation in international flight services by increasing the proportion of passengers to and from Iceland and reducing the share of North Atlantic operations in total traffic.

FMI: www.icelandair.is