Liquidity risk reflects the Company´s ability to fulfil its payment obligations associated with financial and operational liabilities when they come due. Liquidity risk management is based on a policy of minimum cash target levels deemed adequate under both normal and stressed conditions. The Company aims to maintain the level of its cash and cash equivalents and marketable securities equal to the estimated amount of three months' average fixed operating cost where 30% can be in the form of undrawn lines of credit. Cash flow requirements and their impact on cash levels are monitored by using rolling currency flow forecasts, which are updated on a regular basis.
Icelandair Group enjoyed a strong liquidity and financial position at the outset of the COVID-19 pandemic. Swift actions were nonetheless taken immediately to preserve the Company’s strong liquidity to ensure that it could withstand a prolonged period of low production. These actions included drastic capacity cuts with associated reduction in staff, organizational changes, new long-term wage agreements with production related unions, renegotiations with key lenders, lessors, credit card acquirers and vendors, including the Boeing Company, an agreement with the Icelandic government concerning a government guaranteed credit line, a share offering, and disposal of non-core assets.
In total, the agreements with creditors and vendors improved liquidity and reduced financial liabilities by USD 450 million, taking into consideration discounts, deferrals, and payment holidays. Additionally, the combined share offering, and the government guaranteed credit line added up to USD 329 million in new equity and available liquid funds, taking into consideration the warrants issued to investors that subscribed to new shares in the Offering.
At year-end the Company's cash and cash equivalents amounted to USD 118 million, and USD 42 million of marketable securities with trusted counterparties, in total USD 159 million. The Company further has access to an additional USD 172 million in revolving credit facilities whereof USD 120 million is a facility 90% guaranteed by the government. The level of cash substantially exceeds the liquidity policy given the estimated fixed operating cost associated with current production levels. Safeguarding the Company’s liquidity position continues to be the guiding light and absolute priority in the operations until demand starts to pick up.