Operating profit for the first time for PLAY in Q3
- PLAY carried around 311 thousand passengers in Q3 and anticipates around 800 thousand passengers this year.
- Revenues in the quarter were USD 59.9 million compared to USD 32.5 million in Q2.
- In 2023 PLAY forecasts 1.5 to 1.7 million passengers with a turnover of 310 to 330m USD and a positive operating profit from the full year.
- Load factor in Q3 was very acceptable at 85%. The load factor for October was 81.9% when PLAY carried approx. 92 thousand passengers.
- The financial position of the company is strong. Cash and cash equivalents on September 30 amounted to USD 29.6 million including restricted cash. The equity ratio was 12.1% and the company has no external interest-bearing debt.
- Earnings before interest and taxes (EBIT) were positive in Q3 2022 in the amount of USD 1.3 million. EBIT will be negative in the second half of the year and for the full year.
- PLAY's guidance for 2022 has been updated and the company forecasts an annual turnover of approx. USD 140 million this year.
- PLAY's cost target of being under 4 US cents a unit (CASK excl. fuel), was more than achieved and was 3.1 US cents in Q3.
- 27 destinations are currently on sale.
PLAY had an operating profit (EBIT) in Q3, with a load factor of approx. 85% and around 311 thousand passengers flown. PLAY expects passengers to be around 800 thousand in 2022 and between 1.5 to 1.7 million in 2023.
PLAY expects the annual turnover for 2023 to be USD 310 to 330 million and the company forecasts a positive operating profit (EBIT) for the full year.
PLAY will not reach its previously stated target of achieving a positive operational profit (EBIT) 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 (VIA) 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.
PLAY is now seeing positive development as the capacity issues in the Icelandic tourism sector are largely solved and as prepaid COVID-19 vouchers (e.g., airfare, hotels, and rental cars) have decreased significantly. PLAY clearly sees a strong booking trend to Iceland for the winter and next year. 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 will soon launch a number of digital solutions and further strengthen its distribution channels that will increase ancillary revenues and improve online service. PLAY also sees strong booking activity from travel agents for passengers visiting Iceland next year.
PLAY's cost target of being under 4 US cents was achieved during Q3, as unit cost (CASK excl. fuel) was 3.1 US cents, this is due to effective cost control and increased economy of scale in the business.
92 thousand passengers in October and good booking status for the winter
During Q3 2022, PLAY had its first month of full operation after launching the transatlantic hub-and-spoke network with six aircraft operating routes to 22 destinations on both sides of the Atlantic. The quarter was operationally successful with an on-time performance of 85%, a great result for such a new and yet complex operation.
EBIT was positive in Q3 2022 in the amount of USD 1.3 million. PLAY continues to hold a strong financial position, with cash and cash equivalents amounting to USD 29.6 million including restricted cash. The equity ratio was 12.1% and the company has no external interest-bearing debt.
Revenues for Q3 2022 were USD 59.9 million compared to USD 32.5 million in Q2. Net loss in Q3 amounted to USD 2.9 million.
PLAY's booking status for the winter remains good as mentioned above. In October, PLAY carried 92 thousand passengers and the load factor was 81.9%.
"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 (EBIT) under these circumstances and that it is not something to be taken for granted. Our load factor in the quarter was very acceptable at 85% for a new market entrant and seeing that trend continuing into the winter months is a good sign.
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.
The takeoff for PLAY has been very successful in many ways but it must be said that the external business environment has made the financial takeoff heavier for us than we had hoped, i.e., fuel prices and other significant factors have not worked in our favor. Therefore, we are not satisfied with the financial performance of the company this year. We do, however, see many positive signs in our business, and we fully anticipate seeing a positive operational profit in 2023 as our revenue base matures and we become more established in our operation and markets.
The fabulous PLAY team is already hard at work preparing for our next expansion phase and is hiring people, receiving four additional aircraft, and adding new destinations to our network. I look forward to the future as we are already seeing PLAY grow into a strong and profitable low-cost airline with a growing revenue base and happy customers." says Birgir Jónsson, CEO of PLAY.
Further information:
Investor presentation webcast, November 4, 2022
CEO Birgir Jónsson and CFO Þóra Eggertsdóttir will present the company's results on Friday, November 4, at 08:30 a.m (GMT). The presentation will be in English and will be streamed via webcast followed by a live Q&A session at https://www.flyplay.com/investor-relations.
