Icelandair and Boeing Reach Agreement

mbl.is/Árni Sæberg

Vala Hafstað

Icelandair Group has reached an agreement with all its creditors, in addition to reaching a final settlement with Boeing regarding the impact of the aircraft manufacturer’s grounding of its 737 MAX aircraft last year, Morgunblaðið reports.

Icelandair Group announced this through Nasdaq Iceland late last night.

Icelandair’s share offering, which is coming up in a few days, will determine the fate of airline, which will have to increase its share capital by about ISK 30 billion (USD 218 million; EUR 186 million).

The company’s largest shareholders are the Icelandic banks Landsbanki and Íslandsbanki, in addition to CIT Bank, which is American.

According to a statement from Icelandair Group, “agreements on concessions with creditors have been reached. The negotiations with creditors have focused on restructuring cash outflows to match expected cash inflows.”

Icelandair CEO Bogi Nils Bogason.

Icelandair CEO Bogi Nils Bogason. Arnþór Birkisson

“The agreements are conditioned upon the completion of the upcoming share offering and the Company entering into an agreement regarding a government guaranteed credit facility,” the statement continues.

The details of the final settlement agreement with Boeing are confidential. What has been revealed is that it reduces Icelandair’s MAX purchase commitment by four aircraft, and the delivery schedule for the remaining six MAX aircraft ordered has been postponed from the second quarter of 2021 to the first quarter of 2022. Furthermore, the settlement provides additional compensation for Icelandair which covers a substantial portion of the damages incurred from the suspension and will mostly be realized by the second quarter of 2021.

The statement does not reveal the amount involved, but Morgunblaðið reports that in September of last year, the airline estimated its losses due to the grounding to amount to at least USD 135 million.

Icelandair’s statement stresses the importance of the MAX aircraft: “The MAX aircraft continues to be an important element of the Company’s plan to strengthen its business and increase flexibility and capability for growth.”

The airline states that the agreement with Boeing strengthens Icelandair’s liquidity position and allows for more flexible fleet planning in the upcoming years.

Bogi Nils Bogason, CEO of Icelandair, describes the agreements reached as “a major incremental victory” and adds that this means the airline is now at the final stage of reorganizing.

Discussions on a term sheet for a credit facility guaranteed by the Icelandic Government and to be provided by Íslandsbanki and Landsbanki are in the final stages. “The facility will among other things be conditioned upon the completion of the upcoming share offering,” Icelandair’s statement reads.

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