Air Transport World

Transatlantic turnabout: Icelandair made its reputation as a budget alternative across the pond; now it's placing its emphasis on building home-market O&D. (Profile).

Ponder for a moment the revenue prospects post-9/11 for a tiny international niche-market carrier like Icelandair. Business is tough enough for much larger full-service airlines desperately trying to control overhead costs as they struggle past their sell-by dates against an onslaught of no-frills competitors. It is even more daunting when you operate 12 aircraft from a tiny touristically inviting but highly seasonal geographically isolated country splashed in the mid-North Atlantic, whose 280,000 people live mainly from agriculture, fishing and fish processing, concedes President and CEO Sigurdur Helgason. He has been at the helm of the carrier since 1985, by far Europe's longest-serving top airline executive.

Because of its proportionately large involvement in the US-mainland Europe-North Atlantic market via Iceland, where it now is shrinking from a market share once over 50%, "Icelandair was hit harder than many other European airlines by the events of 9/11," says Chairman Hordur Sigurgestsson. The airline estimates it saw a 30% reduction in North Atlantic traffic and puts the "direct effect" of 9/11 at around 1 billion Icelandic krona ($9.6 million). It admits it was hurting even before the terrorist attacks owing to overall changes in the market combined with currency and fuel price fluctuations and the strongly seasonal nature of both the transatlantic and home markets.

Recovery measures have been tough. Staffing was cut 12%-15% in 2001 and smaller cuts were made this year, a total of nearly 350 positions over the period. …

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