Icelandair enters Berlin, benefiting from airberlin's woes; is confident of more room to grow

Icelandair, which celebrates its 80th anniversary this year, is to make Berlin Tegel its newest destination on 3-Nov-2017. The 18-Aug-20017 announcement coincided with news of the insolvency of airberlin, whose main hub is Berlin Tegel and whose only strong growth area has been the North Atlantic.

Icelandair has a well established strategy of connecting passengers between Europe and North America via its Reykjavik hub. It has enjoyed double digit traffic growth for a number of years, stimulated by a strong increase in tourism to Iceland, but driven mainly by its own strategy of expanding trans-Atlantic transfer traffic. This traffic growth has given Icelandair Group a good track record of profitability since the global financial crisis, but its results dipped in 2016 and again in 1H2017.

Intense competition, due to the growth of the Icelandic LCC WOW air (which also offers trans-Atlantic connections) and also from LCCs such as Norwegian (operating nonstop trans-Atlantic flights), has put unit revenue under pressure just as Icelandair is suffering a rise in unit cost.

Nevertheless, Icelandair is implementing a profit improvement plan and still expects plenty of room for growth, as illustrated by its move into Berlin.