Icelandic budget carrier Play will remain in the red for the full year despite making an operating profit of $1.3 million in the summer quarter.
The carrier confirmed that pre-tax earnings before interest will be negative for the second half and its full financial year.
Revenues in the third quarter hit $59.9 million compared to $32.5 million in the previous three months.
Play’s guidance for 2022 has been updated by forecasting annual turnover of about $140 million.
The airline expects carryings of 1.5 million to 1.7 million in 2023 from 800,000 this year, with turnover doubling to between $310 million and $330 million and a positive operating profit from the full year.
Play carried 92,000 passengers in October with a load factor of 81.9%.
The airline said: “Play will not reach its previously stated target of achieving a positive operational profit in the second half of the current year due to challenging external market environment.
“General demand from passengers coming to Iceland was lower than anticipated in late summer and fall due to, amongst other factors, the status of the Icelandic tourism industry which was at maximum capacity with hotel and rental cars fully booked.
“This resulted in more connecting passengers than were expected which deliver less unit revenue than direct passengers to Iceland.
“Ancillary revenue was also lower than expected due to passengers’ increased demand for carry-on bags rather than checked baggage because of the serious condition of baggage handling at airports in our markets.
“At the same time, fuel prices remained high. The above had a negative effect on Play’s financial results.”
The airline is now seeing “positive development” as capacity issues in the Icelandic tourism sector are largely solved and as pre-paid Covid-19 vouchers have decreased significantly.
“Play clearly sees a strong booking trend to Iceland for the winter and next year,” the carrier added. “The Icelandic Tourist Board anticipates 40% increase in passengers coming to Iceland next year compared to 2022 which will have a positive effect on Play’s business.
“Play also sees strong booking activity from travel agents for passengers visiting Iceland next year.”
A number of digital solutions are planned and the airline plans to further strengthen its distribution channels that will increase ancillary revenues and improve online service.
Chief executive Birgir Jonsson said: “This was the first quarter where we had our full transatlantic operation up and running. Since the majority of our destinations were brand-new to our network, the Play brand was mostly unknown in these markets.
“I feel that it is a significant achievement for such a young company to have made an operational profit under these circumstances.
“We will not reach our previously stated target of achieving a positive operational profit in the second half of this year. We would have wanted to see a stronger outcome in the quarter, but we have been battling a very challenging external market environment which has negatively impacted our financial performance.
“Fuel prices have continued to stay at high levels, and the general demand was lower than anticipated in late summer and fall.
“This was especially evident for passengers coming to Iceland as the Icelandic tourism industry seemed to be at maximum capacity with hotel and rental cars either fully booked or prohibitively expensive.
“We’re already seeing positive change in this regard for next year but also acknowledge that the continuing economic uncertainty in our markets will likely impact demand.”