ICELANDAIR GROUP

Q2 2021 results

Investor meeting 23 July 2021

Highlights

Extensive growth of our flight schedule

15 destinations re-introduced
Weekly flights in June 160 vs 28 in April
Number of full-time employees up by 600 in the quarter
8 aircraft reintroduced from storage and 3 Boeing MAX added
Considerable EBIT impact

Positive cashflow from operations

Strong booking inflow for the second half of the year
Net cash from operations positive of USD 65 million increasing by USD 96.8 million compared to Q2 2020
Liquidity position USD 362 million on 30 June 2021

Capacity gradually moving closer to 2019 level

Bookings in the international route network steadily increasing
Cargo outlook good
Still facing considerable uncertainty because of COVID impact on demand

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Financials

Ívar Sigurður Kristinsson
CFO Icelandair Group

Net loss USD 54.9 million

An improvement of USD 35.9 million

Results for the quarter impacted by the ramp-up of the international route network and investment in an ambitious flight schedule for the second half of the year
Passenger volumes steadily rising, although the development was hampered by travel restrictions in key markets
Total revenue increased by 27%
Transport revenue doubled year-on-year
Cargo operation strong with revenues 35% above last year
Operating expenses growing with increase in production and preparation for continued ramp-up
Continued focus on disciplined and tactical flight decision making resulting in cancellation of flights with negative contribution

USD million	Q2 2021	Q2 2020	Change
Transport revenue	55.0	27.6	27.4
Aircraft and aircrew lease	7.8	26.9	-19.1
Other operating revenue	14.7	6.3	8.4
Operating Income	77.5	60.8	16.7
Salaries and other personnel expenses	52.5	52.2	0.3
Aviation expenses	39.0	31.6	7.4
Other operating expenses	22.9	14.5	8.4
Operating Expenses	114.5	98.3	16.1
Depreciation and amortization	25.3	60.2	-34.9
EBIT	-62.2	-97.8	35.5
EBIT ratio	-80.3%	-160.8%	80.5 ppt
EBT	-67.9	-91.9	23.9
Net loss	-54.9	-90.8	35.9

Ramp-up started in the international route network

Destinations added and capacity increased on existing routes

Total ASK'000
per month Q221 and as % of Q219

Total ASK'000
Q221 vs Q220

Passengers per market
per month Q221 in '000

Destinations added

in Q221

North America +7

New York, Minneapolis, Seattle, Washington, Denver, Portland, Chicago

Europe +8

Helsinki, Billund, Zurich, Brussels, Geneva, Tenerife, Berlin, Munchen,

Pax = Passengers, ASK = Available Seat Km, LF = Load Factor, BH = Block Hours, FTK = Freight Tonne KM

Domestic operation continues to show recovery and cargo operation remains strong in Q221

Icelandair cargo

Freight Ton-Kilometers (FTK) increased by 26% year-on-year
Increase in FTK driven by more export and transit gaining momentum
FTK back to pre-COVID levels
Share of transit freight increasing; 13% in Q221 vs 5% in Q220

Lofteidir Icelandic

Operation still at minimum level due to negative COVID effect on demand
Number of sold block hours remained the same year-on-year in Q2

Salaries and salary related cost USD 52.5 million in Q221

Average number of full-time employees 1,783

Salaries and salary related cost USD million

The number of full-time employees added in Q221

Average no of full-time employees excluding lay-offs in Q220

Fuel cost USD 19.5 million

Fuel cost
USD million

Open hedge contracts
Overview tons in thousands

Increased production in passenger network drives higher fuel cost
Fuel market prices increased by 59% year-on-year
Effective fuel price $700 per ton in Q2 21
Mark to market of open contracts at end of Q2 are -2.4 m USD with the average swap price of 663 USD per ton
Total volume of open contracts amounts to 61.7 thousand ton

Operating expenses growing with increase in production and preparation for continued ramp-up

All figures are in USD millions
** H-L-C = Handling, Landing, Communication

Balance sheet

Assets

USD million	30 Jun 2021	31 Dec 2020	Change
Operating assets	440.7	498.4	-57.7
Right-of-use assets	235.6	119.8	115.9
Intangible assets and goodwill	56.5	60.3	-3.8
Other non-current assets	91.8	73.7	18.1
Total non-current assets	824.6	752.2	72.4
Other current assets	22.6	23.4	-0.8
Trade and other receivables	142.7	99.3	43.4
Assets classified as held for sale	7.8	0.0	7.8
Marketable securities	32.4	41.7	-9.3
Cash and cash equivalents	155.5	117.7	37.8
Total current assets	361.0	282.1	79.0
Total assets	1,185.6	1,034.2	151.4

Equity and liabilities

USD million	30 Jun 2021	31 Dec 2020	Change
Shareholders' equity	163.8	232.8	-69.0
Loans and borrowings non-current	248.0	239.6	8.4
Lease liabilities	228.7	119.7	109.0
Derivatives for hedging	0.0	6.0	-6.0
Warrants	9.0	18.6	-9.6
Other non-current liabilities	19.1	17.1	2.0
Total non-current liabilities	504.8	401.0	103.9
Loans and borrowings current	23.0	24.0	-1.0
Lease liabilities	35.5	26.9	8.6
Warrants	15.2	9.1	6.1
Derivatives used for hedging	1.9	11.3	-9.5
Liabilities classified as held for sale	7.3	0.0	7.3
Trade and other payables	132.8	141.7	-8.9
Deferred income	301.2	187.4	113.8
Total current liabilities	517.0	400.5	116.5
Total liabilities	1,021.8	801.4	220.4
Total equity and liabilities	1,185.6	1,034.2	151.4

Net interest-bearing debt excluding lease liabilities USD 147 million

Equity ratio

Interest-bearing debt USD million

Net lease liabilities USD million

NIBD excl. lease liabilities USD million

Deferred income USD 301.2 million

Thereof vouchers USD 89.0 million

Deferred income 30 June 2021
USD million

13
A

Positive net cash flow from operations of USD 65 million in Q221

Significant increase from last year

Net cash from operations Q221
USD million

Strong bookings boost liquidity

Total liquidity USD 362 million on 30 June

Liquidity breakdown
USD million

Liquidity developments in Q221
USD million

Warrants can be exercised in August

Warrant class ICEAIRW130821

Exercise period and payment date

Last day of trading is 30 July 2021

The exercise period starts on 4 August and the final payment date is 19 August 2021

Warrants not exercised before or on the final payment date will lapse and become void

Payment instructions

Exercise price is fixed at ISK 1.13 pr. share
Electronic invoices accessible in investors’ online banks
Payment signifies investors’ intent to exercise the warrants – no further action is needed
All payments are final and irrevocable

Tax considerations

The difference between the exercise price and the respective market price constitutes taxable income
Subject to capital gains tax for individuals and income tax for legal entities
Investors should seek appropriate tax advice suitable for their personal situation

Business update and outlook

Bogi Nils Bogason

President and CEO Icelandair Group

16 months of minimal operations behind us were we kept the infrastructure in place to be able to ramp-up quickly when markets re-opened

Important role in Icelandic society

Direct contribution in 2021

Estimated USD 210 million (ISK 26bn) by employing around 2,100 full time employees over the year

Export contribution in 2021

Estimated over USD 646 million (ISK 80bn) by transporting 400,000 tourists to Iceland

Other indirect contribution in 2021

The indirect contribution is significant, driving economic benefits not only to the local tourism industry but the Icelandic economy as a whole.

Numbers can changes due to Covid-19 development and impact on demand

We have focused on simplifying and streamlining the business and at the same time strengthening the balance sheet

Great capabilities of the Boeing MAX aircraft creating new opportunities

Renewal transition of the fleet in place

The MAX added and B757 slowly faded out

Estimated no. of AC at year-end:

Great capabilities

Better technical reliability, fuel efficiency and payload range than initially assumed creates new opportunities within the Icelandair route network

36% less CO2 emission than Boeing 757

Financing in final stages

The financing of three MAX to be delivered 21/22 is in final stages

With favorable market conditions additions to the fleet for summer 2022 are being explored

Long term strategy reviewed

Strategic initiative to review Icelandair's long-term fleet strategy will be started at the end of this summer

Aim to finish that work before year-end

Strong booking inflow in recent weeks

Booking flow has been good for the summer and fall 2021

Continued strong inflow from North-America
The opening of Europe to vaccinated US travelers has positive effect on the N-Atlantic market
Increased booking inflow from Scandinavia and Central Europe
The start of additional UK routes has been postponed until September 2021 due to slow booking flow
Icelandair capacity in July expected to be 43% of 2019 level and the load factor around 70% compared to 47% in Q2.
Further increased capacity expected in August and improved load factor.

Uncertainty due to Covid 19 development and impact demand and bookings

Strong outlook for Icelandair Cargo

Current flight schedule for 2022 amounts to 80% of 2019 capacity

Key takeaways

Positive cash flow from operations in Q2 2021	Healthy financial position enabling the Company to seize opportunities and address challenges	Strong booking flow in recent weeks, especially from North America	Still a significant uncertainty because of COVID-19

Q&A

Disclaimer

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