Guðmundur Hafsteinsson, Chairman | Bogi Nils Bogason, President & CEO

The year 2023 was eventful and represented the last year of ramp up of our operations. We are back to pre-pandemic size with capacity and the number of passengers in 2023 similar to 2019 levels.

It was an important milestone to turn a profit after taxes in 2023 following many challenging years. Revenue generation was very strong with increased demand in all our markets, especially from North America to Iceland. In addition, we achieved the best on-time performance for years, with Icelandair being named one of the top 10 most punctual airlines in Europe in 2023.

We were faced with various external challenges during the year that affected our performance, in addition to negative results in our cargo operation that we have already acted on. Following one of the strongest third quarters in our history, seismic activity started in the Southwest of Iceland in November, resulting in extensive global media coverage that negatively affected demand and thereby revenue generation. In addition, the impact of labor actions by air traffic controllers in Iceland and a volcanic eruption in December was significant. Furthermore, capacity increases in key markets inevitably put pressure on unit revenue.

However, our core business performed well in 2023 and we transported 4.3 million passengers during the year, 17% more than the year before. Although the market to Iceland remains our largest market, the number of passengers in the via market increased the most, by 22%, and accounted for 41% of total passengers.

Cargo markets were challenging in 2023 and we have taken various actions to improve our cargo operation which started to materialize in the last quarter of the year. Operating profit is expected in 2024, compared to a considerable operating loss in 2023. The leasing business continued to perform well with good results in 2023 and the outlook for 2024 is good.

Profit amounted to USD 11 million in 2023, a turnaround from a loss of USD 6 million last year. EBIT amounted to USD 21 million, improving by USD 2 million. The results for the full year are considered acceptable given market conditions and various challenges but we expect to deliver better results, both in terms of EBIT and after-tax profit in 2024. At year-end 2023, assets amounted to USD 1.5 billion and net financial liabilities were USD 352 million. The liquidity position remained strong, with total liquidity amounting to 323 million. Equity amounted to USD 288 million with equity ratio at 19%.

Sustainability is an integral part of our strategy with focus on economic, social and environmental factors, as well as governance. The value of aviation and tourism is undisputed, especially for an island nation like Iceland. Tourism in Iceland accounts for a significant proportion of Iceland's export revenue and the tax footprint of Icelandair in Iceland amounted to USD 236 million in 2023, increasing by 18%. It is therefore key to ensure the competitiveness of these industries into the future. An important part of that is to reach an effective solution on the collective bargaining agreements that are currently being negotiated in Iceland and the successful easing of inflationary pressures in the country. Furthermore, Icelandair is one of the largest employers in the country and we employed an average of 3,638 full-time employees in 2023, 19% more than in 2022.

We have set ambitious climate targets and have reduced carbon emissions per operational ton kilometer by 15% from 2019. This is largely due to our fleet renewal program that involves a shift towards a new generation of more fuel-efficient aircraft. Another key sustainability focus area at Icelandair is to improve gender equality within management, crew and aircraft maintenance, where we have set goals and made considerable progress.

Over the past years we have put strong emphasis on quality reporting to the market on our sustainability effort in accordance with Nasdaq's ESG Reporting Guide. Currently we are working on the implementation of the new EU Corporate Sustainability Reporting Directive (CSRD) that is coming into effect across Europe.

Over the past few years, we have been working on our long-term fleet strategy. In 2023, we reached a decision and signed an agreement with Airbus for the purchase of 13 Airbus A321XLR aircraft with purchase rights for additional 12 aircraft. Delivery of the aircraft will commence in 2029. In addition, we concluded long-term leases for seven new A321LR with scheduled delivery starting from the winter 2024/2025. The implementation of the Airbus aircraft into our fleet will increase the flexibility of our route network and create opportunities in our future development, as well as further support our sustainability journey.

The prospects for Icelandair’s operations for 2024 are favorable although we expect the first part of the year to remain challenging. We are, however, in a good position to respond to the challenges we will face and seize the opportunities ahead with our flexibility to adapt to the situation at any given time. Our flight schedule in the passenger network will be around 11% larger than in 2023 with 57 destinations, thereof three new – Pittsburgh, Halifax and the Faroe Islands

We are thankful for the support of our unique shareholder base, with over 14 thousand shareholders at the end of 2023. We look forward to our endeavors in 2024 with our outstanding team of employees and would like to thank them for their incredible resilience and great work during in 2023. We would also like to thank our partners and of course our customers for their loyalty and our travels together during the year.

Guðmundur Hafsteinsson, Chairman

Bogi Nils Bogason, President & CEO