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Message from the chairman of board

Address by the Chairman of the Board

The impact of the COVID epidemic on airline operations continued to be substantial in 2021. In cases of such serious setbacks as this epidemic presented, it is important for all of us to take a deep breath and assess the validity of our previous areas of emphasis.

The Isavia parent company operates Keflavík Airport. The Board and management of Isavia updated the policy of the company last year with the aim of being able to embark on an offensive at Keflavík Airport by the end of the worldwide epidemic. The vision is simple: to connect the world through Iceland. During the rapid increase in tourism in the years before the collapse of WOW Air, investments in Keflavík Airport were made in concert with the rapid increase in flights to and from the country. This time, the company wished to begin the construction before the infrastructure will be stretched to the limit anew.

Alongside a new construction schedule of the company, it reviewed the culture inside the company. It is one thing to have sound infrastructure. It is quite another to look after the human resources that service the infrastructure and provide the basic services to the best of their ability. The aim of this emphasis on the workplace culture is to reduce waste in these complicated operations and make Isavia a better partner in the airport community. At the same time, an effort was made to better enable all staff of the company to perform the daily tasks in a constructive manner, with emphasis on self-development and good will to each other in addition to security and sustainability in the work itself.

The future vision of connecting the world through Iceland is based on the importance of air connections in the 21st century. As a hub, the Keflavík Airport serves as a connecting point in a tightly woven net of airpaths in the world. This provides Icelanders with facile travel options far in excess of what our sparsely populated country could sustain by itself. At the same time, our foreign guests are given easy access to our beautiful and interesting country. In 2018, the year of the most take-offs and landings at Keflavík Airport, there were 57 non-stop destinations year round. Such an extensive operation is rare in a domestic market which at that time had a population of 360 thousand persons. This connection network also offers speedy cargo transport to and from the country, a variety of new business opportunities in the Sudurnes region as well as other opportunities elsewhere, leading to increased economic growth. A robust airport hub increases the living standards  of all Icelanders.

But how can Isavia create the basis for connecting the world through Iceland for the long-term future? Keflavík Airport is far more than just Isavia. A large number of other companies operate in the airport to service aircraft, cargo and tourism. This entire chain has to be well oiled and co-ordinated to achieve the goals we aim at.

It is precisely for these reasons that we have updated the object of the parent company: “We are leading an airport community that increases living standards and wellbeing in Iceland”. We are thereby reminding all that both the direct and indirect activity of the airport stands behind the vision of connecting the world through Iceland. Isavia is a leading mover in the airport community that is responsible formaking all of this happen.

At present, our plans are for an investment of ISK 50 billion in the next five years. We see this as a necessary investment for the sustainable infrastructure that Isavia wishes to erect, for the traffic that we project and for the quality of experience that we wish to ensure for those who use the terminal.  The ability of the company is certainly somewhat impaired to undertake this giant investment project after the collapse in air traffic during the COVID epidemic. The Minister of Finance and Ecomonic Affairs has however, on behalf of Isavia´s over the Icelandic state, provided the company with increased capital, and both domestic and foreign lenders see Isavia as a sound borrower. They have given the company access to loan financing at favourable terms so as to create a platform for future connections at Keflavík Airport.

Just as the support of the state as owner constituted the basis for construction at full pace, it is also important that the state as lawmaker avoids imposing needless financial burdens on the company. We need to warn against the idea that the operations of Keflavík Airport, which is engaged in international competition, should finance the operating deficits of the domestic airports of the country. The domestic airport system is important for domestic transport and communications and Isavia would very much like to work on its solidification in cooperation with the state as it has before. Domestic airports however are financially unsustainable and are financed by appropriations from the Treasury. If Isavia is to be saddled with the task of mitigating the standard of all residents in the country, irrespective of their location, it will reduce construction at Keflavik Airport. It will also become possible that the use of infrastructure in the Sudurnes region will again be tested to the limit or beyond, just when the reconstruction effort will be at its zenith.

In addition, the horrific war in Ukraine is beginning to affect air travel and the development of airports around the world, including at Keflavík Airport. The main effect we are experiencing is the impact on supply chain for construction projects which is slowing down and could affect our expansion work. Oil prices have also risen sharply, but so far this has not affected the number of passengers. The outlook for the summer is therefore still promising, but the composition of passengers could change, and many airlines are now considering whether to change routes and pricing. All in all the possible negative impacts on our operations are insignificant compared to the misery and distress of war we now see every day. I wish to thank the management of Isavia and the entire staff for work well done under difficult and ever-changing circumstances. We intend to shoulder the responsibility entrusted to us and have an impact on the future wellbeing of Iceland.

Orri Hauksson, Chairman of Isavia