New low-cost Icelandic airline PLAY has seen a better-than-expected cash position in its second quarter results.
The cash position is more robust than estimated as terms on credit card settlements are more favourable than anticipated.
This advantage stems from the solid financial position of the company and a successful start of operations, which saw the fledgling carrier more than double its passenger load in August over July.
Positive Demand Trends Supports Buildup
PLAY’s first full operational month in July was a success achieving the main objective of safe and reliable operations with a strong focus on passenger satisfaction.
However, frequent changes to governmental travel restrictions and new COVID-19 cases negatively influenced demand and utilisation in the short term.
A rise in COVID-19 cases in Iceland in mid-July subdued a positive trend in demand from Iceland.
For its first month of flight operation PLAY carried 9,899 passengers and the load factor was 41.7%.
August showed a promising trend as ticket sales increased and the outbound market recovered.
Load factor in August was 46.4%, and PLAY carried more than 17,300 passengers, which almost doubled the number of passengers carried in July.
The load factor is expected to rise in September for the second consecutive month.
Fleet Expansion to Ten as New Aircraft Join the Fleet at Lower prices than Expected
Another significant milestone was that PLAY signed two Letters of Intent (LOI’s) with two major international aircraft lessors in August.
These arrangements increase PLAY’s fleet size from three to nine aircraft in spring 2023 and PLAY is in final negotiations to lease the tenth aircraft. Lease terms are better than anticipated in PLAY’s business plan.
The first LOI is for two new A320neo aircraft, manufactured in 2020 and to be delivered in the first quarter of 2022.
The second LOI is for three A320neo and one A321neo 2023 aircraft, which will come into operation in spring 2023.
All four aircraft will be delivered new directly from Airbus to PLAY though the lessor.
With these arrangements, PLAY is taking advantage of favourable terms in the current post-COVID market and will have six aircraft in its fleet in spring 2022 in time for the hub-and-spoke operation between North America and Europe.
Negotiations for additions to the fleet for 2024 and 2025 are also ongoing, bringing the total fleet to 15 aircraft by 2025.
Hub-and-Spoke Operation a Major Step from Point-to-Point Operation
The second quarter report clearly illustrates that PLAY is on track to launch operation to North America in 2022 and the priority for the coming months is preparation for this significant step.
PLAY is currently employing 131 people and the expansion will require further hiring of around 150-200 people.