Icelandair Group is expecting a summer season capacity cut of at least 25% on the previous forecasts, and is working with unions to secure salary reductions.

The airline operates a business model based on transatlantic connections via Reykjavik, and has been hit by US-European travel restrictions linked to the coronavirus outbreak.

Icelandair Group says it has already adjusted capacity by up to 30% and that this is likely to be trimmed further while such restrictive measures are in effect.

The operator is experiencing “significantly decreased” demand on its markets and is assuming capacity for the summer, while uncertain, will still be 25% lower, at least, than previously estimated.

It has not been able to determine the financial impact of the situation. Icelandair Group points out that its overall liquidity has remained at around $300 million, as it was at the end of last year, but says it is expecting negative effects on cash-flow over the next few weeks.

As well as capacity cuts the company is discussing mitigation measures with its labour uniions, in an effort to reduce salary costs “significantly”.

Icelandair had already been dealing with capacity issues relating to the grounding of its Boeing 737 Max fleet and the absence of additional Max deliveries.