Icelandair Group — Investor Presentation 2021

Apr 30, 2021

ICELANDAIR GROUP

Q1 2021 results

Investor meeting 30 April 2021

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Highlights

| Results
Q1 2021 | Strong financial position | Infrastructure in place | Outlook |
| --- | --- | --- | --- |
| Strong cargo performance, disciplined network management and cost control | Liquidity position USD 282 million on 31 March 2021 | Operational flexibility in place for a quick and efficient ramp-up | Moderate ramp-up will start in Q2 with further capacity increases in Q3 2021 |
| Revenues down by 73%, EBIT negative of USD 46.2 million and net loss USD 30.1 million | Equity ratio excluding warrants 23% | Vaccinations and lifting of travel restrictions key for recovery | Booking outlook for Q4 2021 positive
Cargo outlook good and charter interest increasing
A financial guidance will not be provided due to continued uncertainty |

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Financials

Eva Sóley Guðbjörnsdóttir

CFO Icelandair Group

A

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Net loss USD 30.1 million

Improvement by USD 210.1 million

• Strong cargo performance, disciplined network management and cost control
• Total revenue decreasing by 73%
• Capacity of Icelandair decreased by 92% and number of passengers by 89% between years
• Cargo operation strong with revenues 64% above last year and over pre-COVID levels
• 737 MAX reintroduced to service
• Integration of Air Iceland Connect completed in Q1

USD million	Q1 2021	Q1 2020	Change
Transport revenue	35.6	144.0	-108.5
Aircraft and aircrew lease	11.0	26.7	-15.7
Other operating revenue	10.8	38.3	-27.5
Operating Income	57.3	209.0	-151.7
Salaries and other personnel expenses	35.3	80.5	-45.2
Aviation expenses	21.4	90.6	-69.2
Other operating expenses	18.7	86.5	-67.8
Operating Expenses	75.4	257.6	-182.2
Depreciation and amortization	-28.2	-43.7	15.6
Impairment	0.0	-116.2	116.2
EBIT	-46.2	-208.5	162.3
EBIT ratio	-80.6%	-99.8%	19.2 ppt
EBT	-40.2	-264.4	224.2
Net loss	-30.1	-240.2	210.1

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Traffic Data

Extended travel restrictions continue to lead to limited travel demand

Q1 2021
Changes from last year

KPIs as % of Q1 2019

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

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Fuel cost USD 7.8 million

Fuel cost
USD million

• Restructuring in July 2020 resulted in considerable reduction in hedged volume and a longer horizon
• The Company monitors the market closely but has not yet resumed any hedging activities since early 2020
• Negative mark-to-market of open hedge positions at Q1 2021 end amounted to USD 10.3 million (USD 7.0m net of collateral) with a strike price of 664 USD/tonne
• Hedging policy under review

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All main deviations in expenses between years are directly related to the adverse effects of the pandemic

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

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Balance sheet

Assets

	31 Mar 2021	31 Dec 2020
Operating assets	472.4	498.4
Right-of-use assets	107.3	119.8
Intangible assets and goodwill	56.7	60.3
Other non-current assets	77.2	73.7
Total non-current assets	713.6	752.2
Other current assets	22.4	23.4
Derivatives used for hedging	0.0	0.0
Trade and other receivables	121.1	99.3
Assets classified as held for sale	5.1	0.0
Marketable securities	56.0	41.7
Cash and cash equivalents	53.5	117.7
Total current assets	258.0	282.1
Total assets	971.6	1,034.2

Equity and liabilities

	31 Mar 2021	31 Dec 2020
Shareholders' equity	209.1	232.8
Loans and borrowings non-current	236.1	239.6
Lease liabilities	107.7	119.7
Derivatives for hedging	2.5	6.0
Warrants	6.8	18.6
Other non-current liabilities	18.1	17.1
Total non-current liabilities	371.2	401.0
Loans and borrowings current	21.0	24.0
Lease liabilities	26.8	26.9
Warrants	11.4	9.1
Derivatives used for hedging	7.6	11.3
Liabilities classified as held for sale	4.0	0.0
Trade and other payables	119.7	141.7
Deferred income	200.9	187.4
Total current liabilities	391.4	400.5
Total liabilities	762.5	801.4
Total equity and liabilities	971.6	1,034.2

Amounts in USD million

A

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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

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Deferred income 31 March 2021
USD million

Deferred income USD 200.8 million

Vouchers representing USD 96.6 million thereof

A

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Liquidity position

USD 282 million at 31 March

Liquidity breakdown

USD million

Government guaranteed credit facility
Undrawn revolving facilities
Marketable securities
Cash and cash equivalents

Liquidity developments in Q1 2021

USD million

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Business update and outlook

Bogi Nils Bogason

President and CEO Icelandair Group

A

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Divestments and simplification

In line with our strategy to focus on streamlining our core business

Sale of 25% stake in Icelandair Hotels	Sale of Iceland Travel	Integration of Air Iceland Connect
The shares are expected to be delivered in Q2 2021 following fulfillment of all conditions	Sales process initiated in February
The sales process is currently ongoing and the Company expects to reach an agreement with a potential buyer in Q2 2021	Completed in March with estimated annual cost synergies of about USD 3 million
Increased revenues expected from integration of brands, distribution systems and networks

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Fleet available for international passenger network of summer 2021

Available fleet

Seat range in fleet

• Three new MAX aircraft expected to be delivered in the spring of 2021 in addition to the six Boeing 737 MAX aircraft already in Icelandair's fleet
• New calculations based on operational experience underscore the capabilities of the aircraft in the route network of Icelandair, both regarding fuel efficiency and payload-range capabilities, creating new opportunities in Icelandair's network

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Operational flexibility to rapidly increase the frequency and destinations to match demand

Available seat kilometers (ASK) in millions

• During the last four weeks, the bookings have more than doubled compared to the previous four weeks
• Icelandair will start a moderate ramp-up in the second quarter with further increase in production in the third quarter 2021
• In May, Icelandair adds Tenerife to its network and resumes service to Munich, New York, Seattle, Chicago, Denver and Washington
• Outlook for bookings in Q4 2021 is positive

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Passenger route network outlook

N-America

• Strong interest from the United States for visiting Iceland
• Bookings from our destinations in the US have increased in the last few weeks

Europe

• Bookings currently slower but expected to increase when travel restrictions will be eased
• The expected opening of Europe to vaccinated US travelers is a positive sign for the VIA market

Domestic

• Positive outlook for Icelandair’s domestic operations and capacity is expected to reach 2019 levels in June

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Acceleration of vaccinations and lifting of travel restrictions will fuel recovery

Overview of vaccination status and travel restrictions on 30 April 2021

31%
Canada: Borders closed to most foreign visitors, with exemptions. Airline passengers are permitted to transit through Canadian airports

43%
US: Schengen travelers, having stayed in Schengen membership countries within 14 days of arrival, denied entry

28%
Finland: Inbound travel from Schengen banned excl. Iceland until 25/5

23%
Sweden: Ban for travelers outside EU & Schengen until 31 May

26%
Iceland: Passengers with proof of vaccination exempt from quarantine

23%
Norway: Foreign travellers not residents of Norway banned

22%
Denmark: Entry requirements based on a color-coded system

50%
UK: Essentially no restriction for NA or EU

24%
Germany: Entry banned from most countries outside EU & Schengen

21%
France: EU & selected countries open

24%
Spain: Non-essential travel for most countries outside the EU and Schengen banned until 30/4

22%
Italy: EU, Schengen & selected countries open

A

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Favourable outlook for Icelandair Cargo

Freight volumes regained pre-COVID levels

Transit freight gaining momentum

Transit freight as % of total freight:

Most of the freight will continue to be transported with freighters until the capacity in the Icelandair route network has recovered

Passenger holds Freighters

Investment in conversion of two B767-300ER aircraft into freighters

The new freighters carry around 50% more freight than the current two B757-200 freighters in the fleet

The aircraft to be introduced in fall 2022

The strategy is to increase cargo capacity in main markets and strengthen Iceland as a cargo hub

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Increased interest from charter and leasing markets and improved demand expected for the second half of the year

LOFTLEIDIR ICELANDIC

A

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Weak demand for travel in Q2 2021 for VITA but outlook is good for the second half of the year, especially from September and onwards

vita

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Key takeways

Acceptable results in Q1 during extraordinary circumstances	Strong financial position and operational flexibility in place for an efficient ramp-up	Leveraging the interest in Iceland with targeted campaigns	Increased bookings and progress of vaccinations platform for takeoff from hiatus mode in the coming weeks

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Q&A

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Disclaimer

• This material has been prepared by Icelandair Group hf. It may include confidential information about Icelandair Group hf. unless stated otherwise all information is sourced by Icelandair Group hf.

• The circulation of the information contained within this document may be restricted in some jurisdictions. It is the responsibility of the individual to comply with any such jurisdictional restrictions.

• Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Icelandair Group. Past performance should not be viewed as a guide to future performance. Where amounts involve a foreign currency, they may be subject to fluctuations in value due to movements in exchange rates.

• Icelandair Group cannot guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on sources that Icelandair Group believes to be reliable. Neither Icelandair Group nor any of its directors or employees can however warrant that all information is correct. Furthermore, information and opinions may change without notice. Icelandair Group is under no obligation to make amendments or changes to this presentation if errors are found or opinions or information change. Icelandair Group accepts no responsibility for the accuracy of its sources or information provided herein and therefore can neither Icelandair Group nor any of its directors or employees be held responsible in any way for the contents of this document.

• This document must not be construed as investment advice or an offer to invest.

• Icelandair Group is the owner of all works of authorship including, but not limited to, all design, test, sound recordings, images and trademarks in this material unless otherwise explicitly stated. The use of Icelandair Group’s material, works or trademarks is forbidden without written consent except where otherwise expressly stated.

• Furthermore, it is prohibited to publish, copy, reproduce or distribute further the material made or gathered by Icelandair Group without the company's explicit written consent.

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