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Aviation History
1975
1975 - 1816.PDF
-*<:<: f FLIGHT International, 11 September 1975 AIR TRANSPORT Icelandair uses two Hoeing 727-100s on routes to the UK and Scandinavia assess the relative value of the stock of the two airlines shouldn't see it, because Flugleidir is not an airline. It and set the rate of exchange for Flugleidir stock. Johnson has no operating rights and no aircraft." explains how the company is functioning while that Another reason for maintaining separate identities is process is going on: "It was agreed that for a three-year the fact that Icelandair was a member of the International periqd, until the annual general meeting in June 1976. both Air Transport Association and Loftleidir was not. lata, airlines would hold equal power. The two boards were says Johnson, "had no objection" to a merger between a combined to make a 12-member board, which will go down member and a non-member. "The routes are kept separate to seven after the annual meeting in 1976." and we keep separate accounts. The situation is not unique. The operations of the company are supervised by a There are many airlines who are members of lata which three-man executive committee; Johnson serves as chair- own airlines that are not members." man and the other two members are Alfred Eliasson and Does this give Loftleidir all the information and other Sigurdur Helgason, another Loftleidir founder. advantages of lata membership with none of the obliga- Before the merger Icelandair had 500 employees and tions? "lata is no longer a closed club. So the information Loftleidir 1,200, not including the employees of the two is often available in the aviaton press as soon as you get hotels it owned and operated in Reykjavik. After the it as an lata member. Loftleidir's main interest is the merger, the reservations departments of the two airlines North Atlantic and Icelandair as an lata member has no were combined. This was followed by combining offices influence on North Atlantic fares because it doesn't in cities where both had maintained staffs, such as operate there. We don't use our lata membership so as Glasgow, London, Copenhagen, Oslo and Stockholm. to undermine anything in lata or to get facilities for The next step was to plan the organisation of Flugleidir, Loftleidir which it would otherwise not get." with the help of consultants R. Dixon Speas of New York. Icelandair uses five Fokker F.27s for the domestic The company is made up of five divisions: finance, services and two 727-100s for the UK and Scandinavia responsible for financing, accounting, budgeting, statistics, routes. Loftleidir, which has been operating four DC-8s taxes, insurance, purchasing, auditing and computer leased from Seaboard and Western, is buying two of them, services; operations and technical affairs, in charge of air- but will continue to lease two others in the summer, craft operations, maintenance and ground equipment, In the first six months of this year Flugleidir reported handling of aircraft abroad, and stations in Keflavik, 159,819 international passengers, 93,082 domestic passen- Luxembourg and New York; domestic services, in charge gers, and 35,999 passengers on International Air Bahamas, of domestic flight operations; marketing division, respon- The domestic traffic was a slight increase over the 90,408 sible for passenger and freight marketing and sales; and passengers handled in the first six months of 1974, but administrative services division, in charge of personnel, the other two categories showed slight decreases (from legal affairs, public relations, office management and 164,122 international and 40,921 Bahamas passengers). As facilities. a result, total traffic was down to 288,900 from 295,451. The two airlines and the holding company now have Flugleidir is not planning to add any additional aircraft about 2,000 employees (including the hotel staffs), most untn traffic picks up. Johnson says: "We will need some of them being employees of Flugleidir rather than the extra capacity on the routes to Scandinavia, but not this individual airlines. Although even the operations depart- year. i presume we will then acquire some additional ments have been combined, the pilots and other flight 727-100s. We are verv happy with the 727-100. It is slightly crew members are still employed by the airlines. smaller than the 727-200 and the seat-mile cost is slightly Johnson emphasises that there are still three separate higher, but we are operating a convertible aircraft and airlines. The third is International Air Bahamas, which can switch easily from passengers to freight or a corn- operates one DC-8 leased from Seaboard and Western; bination of both." Loftleidir has owned the IAB stock since 1970. The airline Icelandair's F.27s have 48 seats instead of the usual showed a small loss each year until the last two years 44, which means that the pitch is 30in or 2912in. "We have iwhen it showed a small profit, but its operations and had some complaints," admits Johnson, "but it is a ten financial results are kept separately. per cent increase in capacity and the routes are short." Since the merger, Loftleidir, which operated three DC-8 There are, says Johnson, no plans to replace the F.27s, flights a week to Scandinavia, has reduced its frequency "m the near future. We don't foresee the operation of jets and no longer serves Copenhagen. Icelandair has stopped domestically in Iceland for ouite some time because our flying into Stockholm. Both airlines still operate to Oslo airports are mostly gravel and some of them are quite and London, but without direct competition. On the London primitive. And the distances are very short; the longest run, for example, Loftleidir. has only one flight a week and run is 300 miles." Icelandair has four. 1 In 7972, the last full calendar year before the merger, Asked why Flugleidir h^d decided to stop short of a Icelandair showed a small profit and Loftleidir a small complete merger, Johnson explains: "We wanted to keep' loss. In 1973, the results were the same and the net result the two names because each airline has spent a lot of was a small loss. The figures for 1974 were not complete money building up its name and has earned a lot of good- when Mr Johnson talked to Flight, but he said that, despite will. For example, if Loftleidir were to change its name the decline in traffic and the increase in fuel prices, in the United States, it would be at a disadvantage. The Flugleidir's net results will be "verv close to break-even travelling public never see the name Flugleidir and for the two airlines combined."
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