Iceland’s PLAY Airlines Halts Fleet Expansion to Strengthen Financial Stability Amid Market Challenges
PLAY Airlines, the Icelandic low-cost carrier based at Reykjavik Keflavik, has announced a strategic pause in its fleet growth for 2024, cancelling two letters of intent (LOIs) for aircraft dry leases scheduled for 2025. This decision marks a significant shift in the airline’s expansion strategy, emphasizing the need to bolster financial liquidity in response to the current volatile market conditions.
During a recent quarterly investor call, PLAY’s Chief Executive, Birgir Jónsson, underscored the importance of building a financial buffer to weather external market fluctuations. “The last few months have underscored the impact of external factors on our operations. As a response, we’re focusing on stabilizing the airline following a period of rapid growth and preparing for future expansion,” Jónsson explained. He highlighted that the airline anticipated positive financial outcomes for 2023 before facing a series of challenges, including the Gaza crisis, surging oil prices, inflationary pressures, and volcanic eruptions in Iceland that deterred tourism.
The airline reported a substantial operating loss of USD 35.2 million in 2023, prompting a more cautious approach to growth. For the first time since its inception, PLAY will not increase its fleet size this year, maintaining its operation with ten aircraft.
Despite the scaling back on immediate fleet expansion, PLAY remains optimistic about its long-term growth prospects, aiming to increase its fleet from ten to twelve aircraft by the end of 2025 and targeting an 18-20 aircraft fleet by 2029.
In an effort to strengthen its capital position, PLAY is planning to transition from the First North Growth Market to the Nasdaq Main Market in Iceland. This move is intended to attract additional capital and diversify its shareholder base. The airline anticipates raising between ISK 3-4 billion Icelandic krónas (approximately USD 21.8-28 million), pending shareholder approval at a meeting scheduled for March 21, 2024.
Despite the temporary halt in fleet expansion, PLAY is setting its sights on achieving operational break-even in 2024 and projecting an EBIT profit by 2025. This strategy reflects a cautious yet forward-looking approach to navigating the unpredictable aviation market, with a focus on long-term sustainability and growth.
Currently, PLAY’s fleet, as detailed in the ch-aviation fleets module, consists of six A320-200Ns, three A321-200Ns, and one A321-200NX. The airline had initially planned a more aggressive fleet expansion, including the potential addition of four new aircraft in 2025 and considering an aircraft lease in 2024. However, the recent adjustments underscore PLAY’s commitment to prudent financial management and strategic planning in response to external challenges.