Icelandair’s aging Boeing 757s will have to ensure another busy summer as the airline is still struggling without its 737 MAX. Icelandair stated that it will hold on to some of its 757s for longer in order to fill the schedule gaps until the MAX returns to service. Additionally, the airline doesn’t expect to receive more than three new 737 MAX before the end of 2020.
The MAX impact on Icelandair
When we talk about the impact on airlines of the Boeing 737 MAX crisis, a few names spring to mind. Southwest Airlines, for example, with the world’s biggest fleet at the time of grounding. Or Ryanair, who is constantly vocal about the impact the lack of MAX is having on its operations. But sometimes it’s the smaller airlines that get hit the hardest.
Icelandair is a prime example of such an airline. An all-Boeing airline, Icelandair had put all its eggs in one MAX shaped basket for its fleet renewal efforts. Five were delivered prior to the grounding last year, but have since been in storage.
While big airlines like Southwest are able to somewhat mitigate the impact of the MAX grounding, for Icelandair, with its modest fleet of just over 30 aircraft, five aircraft missing constituted a massive loss in capacity. In the airline’s recent earnings call presentation, it described just how much capacity it lost, saying,
“The suspension of the MAX aircraft has resulted in unprecedented impact on the operations of Icelandair in 2019. The Company’s MAX aircraft were intended to cover 27% of Icelandair’s passenger capacity in 2019.”
Over a quarter of capacity lost is a huge blow to any airline. Icelandair has, so far, struggled on, holding on to aging Boeing 757s a bit longer than planned in order to avoid cutting routes. Now, it seems it’s going to have to do so again for the summer 2020 season.
Planning for the worst
Icelandair is keen to avoid being caught off guard by the 737 MAX. As such, it has removed the type from schedules right through the summer peak season, pre-empting any delay to the anticipated mid-year return of the MAX. In the earnings release, Icelandair stated,
“There is still uncertainty when the MAX aircraft suspension will be lifted. The financial impact will however be considerably less in the year 2020 than in 2019 as Icelandair has been able to organize its operations in 2020 with this possible scenario in mind.”
Going into 2020 with more delays in mind is a good move by Icelandair. In fact, the carrier has already put measures in place to cope with the lack of aircraft. It said,
“The Company has already entered into leasing agreements regarding three Boeing 737-800 aircraft and a decision has been made to keep more Boeing 757 aircraft in operation in 2020 than originally planned.”
The lease of three 737-800s will enable Icelandair to serve some of those routes that the 737 MAX would have worked on. However, it will come at a cost to the airline. Not only is it paying to lease the aircraft in the first place, but it’s also losing out on the fuel savings it would have got from the use of the MAX. Undoubtedly this will be factored into its compensation claim from Boeing.
Keeping the 757s longer is also not an attractive option for Icelandair. Its youngest 757 is 18 years old, with the eldest in the fleet clocking in at over 29 years of age. Aircraft of this age can become unreliable, as Icelandair has seen in the past, which can lead to diversions, delays and, ultimately, claims by passengers under EU261. Again, Icelandair will likely be chasing Boeing for recompense on any of these issues.
Only expecting three MAX deliveries by the end of 2020
Boeing has a lot of work to do to get the hundreds of 737 MAX it has produced and parked up delivered to its customers. Icelandair is under no illusion that this will take some time. The airline said,
“The Company is still expecting 10 MAX aircraft to be delivered. The initial delivery schedule was that 3 of these MAX aircraft were to be delivered in 2019, 5 MAX aircraft in 2020 and 2 MAX aircraft in 2021. The Company expects the 3 MAX aircraft that were to be delivered in 2019 to be delivered before the end of 2020. However, the Company realizes that further delays may be expected.”
Including the five MAX that Icelandair already received, it should have been flying 13 by the end of this year. If the airline’s prediction is right, then just seven will be in operation by the close of 2020. Although the MAX is edging ever closer to a return to our skies, it seems the fallout from this unprecedented crisis will be felt for some time to come.