Icelandair CEO resigns

Icelandair President and CEO Björgólfur Jóhannsson has resigned, according to Morgunblaðið. Bogi Nils Bogason, the company’s CFO, will replace him as interim president and CEO, at the request of the board of directors. The news comes at the same time as Icelandair Group lowers its earnings forecast for the year by USD 40 million. The company forecasts an EBITDA (earnings before interests, taxes, depreciation and amortization) for 2018 at USD 80-100 million. That estimate is down by about 50 percent since the beginning of the year, when it was forecast to be USD 170-190 million.

 “This does not come as a surprise,” comments Elvar Ingi Möller, specialist at the analytical division of Arion Bank, about the new earnings forecast. “Earnings for the first quarter were disappointing, and more so than analysts and market experts had assumed. The company’s earnings forecast [issued in July], which assumed an EBITDA of USD 120-140 million for this year, was such that market players, we among them, had doubts about its being realistic.”

In a statement, Björgólfur writes that the lower earnings forecast is primarily explained by lower income than predicted, for two reasons:

First, average fare increases, planned for the last months of the year, will not come into effect until next year. Second, the implementation of changes to sales and marketing operations of the company, made in early summer of 2017, were not successful enough. Furthermore, changes in the company‘s route schedule, made at the beginning of this year, created an imbalance between the supply of flights to Europe on the one hand and North America on the other hand.

“For this reason, forecasting models, which among other things are based on historical trends, have not worked as they should have, and an updated earnings forecast is lower than a previous forecast had predicted,” the statement reads.

“I don’t remember this information being revealed before,” Elvar remarks, “at least not where this is acknowledged.” He notes that the analytical division’s forecast for this year’s earnings, following the publication of the financial statements, and based on passenger numbers for July, had approached the upper limits of the updated earnings forecast of Icelandair Group.

“In that regard, this is not as surprising as at the beginning of July, when the company had hinted to the market that these often discussed average fares were increasing. We knew the pressure would continue for the second half of the year. The company is now telling us that [the pressure] will continue into next year, but also admitting that streamlining measures have not gone well enough.”

In a statement, Björgólfur writes that the decisions were made on his watch and that they caused the company financial trouble this year. He concludes, “I, as CEO of the company, am responsible toward the board and shareholders. Earlier today, I informed the board that I wished to resign from my position as CEO of Icelandair Group. Although the aforementioned problems have been addressed, it is a matter of responsibility not to have followed through with the changes in a timely and adequate manner. I believe it behooves me to shoulder that responsibility and, therefore, I resign as the company’s CEO.”