Impact on the economy

From growth drivers to pillars of the Icelandic economy

Over the last decade, the aviation industry has become a critical pillar of the Icelandic economy. Both directly through its own contribution and indirectly by transporting tourists to Iceland and facilitating stronger connections with the rest of the world for Icelandic firms. During this period, Icelandair Group has played an important role in fostering growth and job creation in both the aviation and tourism industries, the twin engines that drove Iceland’s economic boom in the 2010s.

Travel restrictions and travel hesitancy due to COVID-19 have slowed down operations in the Icelandic aviation and tourism industries which are currently in what could be described as hibernation. It is the firm belief of Icelandair Group that this lull in activity is temporary and that both industries will within a few years return to their prior levels of economic activity once the effects of the COVID-19 pandemic start fading out. Iceland continues to be a sough-after destination for tourists and there are reasons to believe that Iceland is a good fit for post-pandemic travel preferences. Furthermore, the transatlantic market environment is likely to be favourable for Icelandair’s VIA-product in the next few years.

Playing a leading role in leading industries

To demonstrate the contribution of Icelandair Group to the Icelandic economy, the Company has collected several economic indicators from 2019, the latest year for which there is comprehensive data available.

Iceland welcomed 2 million tourists in the year 2019. Most of them flew with Icelandair which was responsible for 67% of all seat capacity to and from Iceland and can thus rightly be called the bridge to and from Iceland. In total, 7.2 million passengers went through Keflavik International Airport, including 1.9 million transit passengers flying with Icelandair between Europe and North America.

Icelandair Group’s direct contribution to the Icelandic economy through salaries and related expenses, taxes and pension contributions was USD 416 million (ISK 3.5 billion) in 2019.

Indirectly, through its leading role in the aviation and tourism industries, Icelandair Group’s contribution was even greater. In 2019, aviation and tourism accounted for around 11% for of Iceland’s GDP, a contribution of USD 3 billion (ISK 330 billion). Moreover, tourism was responsible for 35% of export revenues, a contribution of USD 3.9 billion (ISK 470 billion). The total workforce employed by the two industries was 41,000 which was 21% of the total labor market in Iceland.

The connections enabled by Icelandair also facilitate significant value creation in other Icelandic industries. As an example, Icelandair provides a direct route for fresh seafood and other key products to 58 destinations in Europe and North America. By selling the catch fresh – as opposed to frozen – Icelandic fish exporters can tap into more demand and sell products at higher prices. The cargo network has also enabled multiple importers to bring fresh quality products for the Icelandic consumer.

Icelandair Group’s direct contribution to the Icelandic economy through salaries and related expenses, taxes and pension contributions was USD 416 million (ISK 3.5 billion) in 2019.

Contributing to a strong and resilient Icelandic economy

The growth in tourism and aviation in the 2010s transformed Iceland’s economy leading to a strong current account surplus and the country’s first ever net positive foreign asset position. During the decade, both public and private debt levels were greatly reduced and the same is true for the country’s unemployment rate. These strong fundamentals put the Icelandic economy in a position to withstand the severe negative effects of the COVID-19 pandemic and to bounce back stronger than ever.

Aviation and tourism were responsible for 11% of GDP in 2019

The tourism industry accounted for 35% of total exports in 2019

Tourism and aviation employed 21% of the Icelandic labour market in 2019

Conference on economic impact of aviation and tourism

Nearly 300 people attended an open meeting held on the 27th of January by Icelandair Group, International Air Transport Association (IATA) and the Icelandic Travel Industry Association (SAF). The focus was on the Status and Importance of Aviation and Tourism.

The occasion of the meeting was the visit of Rafael Schvartzman, Regional Vice President of IATA Europe, to Iceland. The status and importance of aviation and tourism in Iceland was discussed as well as the sector's actions with regards to climate change.

Þórdís Kolbrún R. Gylfadóttir, Minister of Tourism, gave an opening speech and discussed the vital role of the tourism industry in the Icelandic economy.

Rafael Schvartzman spoke about the importance of aviation and discussed the industry's actions to reducing the industry's carbon footprint.

Ásdís Kristjánsdóttir, director of the economic division of Business Iceland, also spoke at the meeting about the development of Icelandic Tourism. Ásdís reviewed the impact that the rise of the tourism industry has had on the Icelandic economy over the past decade and the position that the industry currently holds.

Following the presentations, Bogi Nils and Elín Árnadóttir, Deputy CEO of Isavia, participated in a panel discussion with Rafael and Ásdís, chaired by Bjarnheiður Hallsdóttir, Chairman of SAF. The panel discussion included the importance of ensuring the competitiveness of the industry in the future by looking at the value created by the tourism industry for Iceland and not to focus on the number of tourists