Earnings call transcript: Fly Play hf Q1 2025 sees revenue dip, new routes launched

Fly Play hf reported its financial results for the first quarter of 2025, revealing a 15% decline in revenue to $46.4 million compared to the previous year. Despite this, the company maintained its EBIT at -$21.7 million, similar to the previous year’s performance. The airline’s stock experienced a minor decline of 0.76%, closing at $0.66, continuing its challenging year with a 63% decline over the past 12 months. According to InvestingPro analysis, the company’s overall Financial Health Score stands at 2.12 (Fair), while current valuations suggest the stock may be undervalued. The company remains optimistic about future improvements, driven by strategic expansions and a focus on leisure destinations.

Key Takeaways

• Revenue decreased by 15% year-over-year, reaching $46.4 million.
• The company launched new leisure destinations, expanding its network.
• Fly Play hf’s stock fell by 0.76% following the earnings release.
• Cash position improved to $21.1 million, with no external debt.
• The company anticipates operational improvements in the coming quarters.

Company Performance

Fly Play hf’s performance in Q1 2025 was marked by a significant revenue drop, attributed to broader industry challenges and a strategic shift towards leisure travel. Despite the revenue decline, the company’s EBIT remained stable. The airline’s focus on leisure routes and new destinations, such as Faroe, Portugal, and Antalya, aims to capture growing demand in the leisure travel segment.

Financial Highlights

• Revenue: $46.4 million, a 15% decrease from the previous year.
• EBIT: -$21.7 million, consistent with the previous year.
• Cash position: $21.1 million, a $4 million increase year-over-year.
• Yield per passenger increased by 1.2%.
• RASK decreased by 3.3%, while CASK rose by 2.5%.

Outlook & Guidance

Looking ahead, Fly Play hf is targeting a 15-20% reduction in overhead costs and expects operational improvements throughout 2025. The airline plans to operate seven aircraft during the peak summer months and anticipates continued RASK improvements. With analyst price targets ranging from $18 to $35, market expectations remain mixed. The company is also focusing on stable income from its ACMI operations, projecting approximately $1 million per aircraft annually. For deeper insights into Fly Play’s future prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis and expert commentary.

Executive Commentary

Company executives expressed confidence in the strategic changes underway. One executive noted, "All signs indicate that the changes we are making in our business model will result in a much improved financial performance of the company." Another highlighted the company’s commitment to expanding its leisure offerings: "We do expect to increase our leisure offering year on year, hopefully indefinitely."

Risks and Challenges

• Market Saturation: Increasing competition in the leisure travel market could impact growth.
• Economic Uncertainty: Macroeconomic factors may affect consumer travel spending.
• Operational Costs: Rising costs associated with aircraft leasing and maintenance could pressure margins.
• Regulatory Changes: Potential changes in aviation regulations could impact operations.
• Currency Fluctuations: Exchange rate volatility may affect international revenue streams.

Fly Play hf’s Q1 2025 results reflect both challenges and opportunities as the company adapts to evolving market conditions. Its strategic focus on leisure destinations and operational efficiency is expected to drive future growth, despite the current revenue dip.

Full transcript - Fly Play hf (PLAY) Q1 2025:

Company Presenter/Executive, FlyPlay: Welcome, dear viewers, to this presentation to our first quarter results of the year 2025. We will keep this as we have in the past few quarters that we will go through some of the highlights of the quarters. Then we will go through the financials of the first quarter. And then I will give you an update of where we are and where we’re going as a company. So starting with just a few basic highlight numbers, we see that our on time performance in the quarter was 81.5% and our load factor 77.2%.

We had eight aircraft in operation in the first quarter of last year of this year, sorry, one being more or less in maintenance and one in operation in Miami as we’ve told you before. In the bottom right corner, can see the passenger mix and the passengers traveling from Iceland were 32% to Iceland Forty Percent and via passengers 28%. This reflects the changes we are making to our business. The Via share of our customers has been the biggest portion of the pie until now and we presumably see this shrink even further. Now we have obviously told you before, but there was a major milestone for us towards the end of last quarter where on March 28, we were awarded our second AOC and this one in Malta.

And so Play Europe is now 100% owned subsidiary of FlyPlay and is a multi entity. We have leased four three twenty one neo aircraft, four of our 10 aircraft to the company SkyUp and we’re starting operations in quarter two. Those four aircraft will all be assigned to this to the Maltese AOC and one has already been registered down there. We are also committed on our path to continue and increase our focus on the leisure part of our network. We can see this in the first quarter of this year in that there was a 17% increase in leisure capacity when compared with the first quarter of last year.

And this happens despite a 14% reduction in overall seat capacity or available seat kilometers during the quarter with only eight aircraft in production as told before. And this means that the leisure part of our network is going up from 23 in the first quarter of last year to 31% in the first quarter of this year. And we are continuing to provide Icelanders and other people residing in Iceland with exciting new leisure destinations and have just started flying to Faroe in Portugal and Antalya in Turkey for the first time. We are also pleased to be able to tell you about a growing customer satisfaction. We were actually also able to tell you this in our last presentation, where our Net Promoter Score was increasing between twenty three and twenty four.

And we are seeing a continuous of that with almost a 50% rise in the NPS score between first quarter of last year and first quarter of this year from 33 to 49. And we are as ever committed to provide our customers a great product, low prices, exciting destinations. And we see and sense that our customer base and the people here are really thrilled with our offering. And now on to the financial results. So here are some of the number that we will be covering in more detail in the next couple of slides.

And I think I’ll just let this sit here for a second before we go on into some more detail. So here we can see that the revenues in the first quarter of this year was $46,400,000 down $8,000,000 on last year with decreased capacity. So revenue was down 15%, almost identical to the decrease in available seat kilometers. And this is reflected in very similar EBIT $21,700,000 negative EBIT almost identical to last year and this is despite a sort of delayed Easter impact as Easter was part of the first quarter last year, but was mid April this year. And so the Easter effect one of the better periods every year for this airline is in second quarter.

And we are also happy to tell you that our cash position is almost $4,000,000 better than it was at the end of first quarter last year. So $21,100,000 and as ever no external interest bearing debt. With the income statement, we can again see the operating income how that is down $8,000,000 vis a vis last year on the back of less production. We see the ACMI revenue of $1,300,000 that’s recognized in other revenue. And we also see that the cargo revenue is flat year on year despite considerable reduction in capacity.

So like for like the cargo is up. Operating expenses are decreasing almost identical dollar number as the revenue. And this despite that the ETS units being $2,600,000 higher this year than last as last year there was actually a positive impact from the ETS being the prices having dropped in that quarter. And so this remains that the EBIT remains stable and that result for the period is slightly better than last year. And so when we look at how this is made up, we see that the yield per passenger is going up a little bit 1.2% while the load factor is going down a little bit and the decreased load factor is a reflection of the changes in the business model as we have always seen a slightly lower load factor in the point to point part of our network where we can’t just fill the aircraft with via passengers.

And so this results in our RASK being down 3.3% from four twenty four to 4.1. But again, it should be noted that our RASK was higher year on year or considerably higher year on year until the two last weeks of the quarter when the Easter factor last year through the of through the RASK this quarter slightly below that of last year. And then on to our cost. Our CASK cost per available seat kilometer, this is almost flat as well 2.5% up and we see the biggest contributor there is the ETS units 0.23 per available seat kilometers had we not had that factor obviously we would have been down. Fuel price has gone down.

So we see an effect to that to our benefit depreciation slightly up, but these are all I would say not huge numbers. And we can say that our commitment to cost optimization is as strong as ever. Now on to the balance sheet. I have already mentioned, as you can see here as well that our cash position is up almost $4,000,000 compared with same time last year. Other than that, we can see that the balance sheet is shrinking a little bit.

I have explained many times and I can do that once again that we don’t have really interest bearing debt. It’s just that we have our according to IFRS, we book as assets the long term lease agreements we have with the 10 aircraft we have on long term lease. And on the flip side of that coin, post as debt the lease liabilities. And these assets and this debt does decrease with time as the lease agreements have a shorter term with time. So the balance sheet is shrinking a little bit.

I don’t think there is anything really major else going on here. Now on to the cash flow. So the cash flow in the quarter was negative by $2,500,000 We see that we posted a loss higher than that. But as always in the first quarter, we see working capital movements in our favor. This is because we are selling and collecting more in the first quarter selling the summer period.

And then we will see in the latter part of the year this reverse when the profits go up and the working capital movements go the other way. This is an improvement on the first quarter of last year by $4,000,000 where the cash flow is better by $4,000,000 than it was in the same quarter last year. Now fuel price development has generally been favorable for the past few quarters or throughout 2024 more or less and continues to be so. The current spot price is slightly lower than $700 and almost the lowest we’ve seen since we started operations, which obviously is favorable for an airline. We have a hedge policy in place that has remained unchanged for a couple of years.

And it says that we’re supposed to hedge up to 60% of our estimated oil purchase for the next quarter, up to 40% for the quarter after that and the six months after that up to 30. We can see that we have now hedged 46% of quarter two, thirty 4% of quarter three and then 1416% of the quarters after that. This is somewhat lower than we are permitted to do, which is fortunate with the situation as it is as the hedges are of course at the higher level than the current prices as we have been hedging along the way when the price has been higher. So the hedges are out of the money, but this helps smoothen out fluctuations and our cost. And so a summary of our financials.

We can see operational improvements materializing. There is a modest improvement in net income between years, which is in line with what was communicated three months ago. So in our last quarterly statement in our announcement and in a similar webcast, I said that we would have a very similar net results as we had in the first quarter of last year and that is exactly what has happened. So RASK and CASK are almost flat between years, slight adverse movements in both. RASK, as I said before, was improving throughout the quarter with the only exception being the final two weeks of March that are affected by the shift in Easter, which was again in first quarter last year, not this year.

And when we are comparing like for like and adjusting for one off items, CASK and our ex fuel CASK is also improving between years. And there is improvement in cargo per production unit. So there is improvement sort of across the board. Now on to where we are and how things are looking from our perspective. So approximately six months ago, we announced these changes in our approach to the market.

And there were two main items that we said that we would place our focus on, two pillars. So we would continue to focus on the leisure market and grow our market share there, grow our reliance on the point to point leisure market. And so we are seeing 7% increase in our leisure capacity for the year 2025 despite fewer aircraft being operated out of Keppelhajek Airport and considerably less production or considerably less own production. This is because the leisure destinations continue to be profitable for play. We will operate seven aircraft out of Keppelhoek during the busiest months of the year and this includes one aircraft that we have leased in to maintain very close to the announced flight schedule this summer.

And the second pillar that we will rest our future on is this business of operating our aircraft for other operators. And so we have secured this agreement by deploying four aircraft for the Maltese airline SkyUp from the spring and summer of this year onwards. The first aircraft will be deployed in about two weeks time on May 12. And then at the July there will be four aircraft operating for SkyUp. And this part of the business will provide us with a stable, predictable, profitable income.

We are also fortunate to see that we can see RASK improvements going forward. To some extent this is because we have changed our approach to the market. So we have cut some of the poorer routes that we had out of the system. So we are seeing the better performing Euro City and better performing North America destinations in our network and the worst performers out. And this we can see is resulting in a stronger forward unit revenue.

The leisure part of the network we are actually growing, but we’re also seeing the forward revenue there being increased year on year. The least improvement we can see in quarter two going forward this is because the network is growing very rapidly in quarter two whereas the growth in the latter part of the year is more modest as we had already in the latter part of last year started to increase our leisure part of the network. So we can also report that the load factor is ahead of last year, ahead of where we were at the same time last year. So we can see we are ahead for all quarters in the 2025. And we’re happy to report that our ancillary revenues are improving year on year also looking at all quarters of the year.

So this is a result of our continuous efforts in improving our ancillary product offering and giving our customers products that they like. And so in general, we are happy to report to you that all of the elements of the new business model are progressing as we planned and as we have outlined for you. So we have our schedule streamlined. We have more leisure capacity available from Kjabla Wick this year than last, increasing the portion of our network being in the leisure part up from 27 to 36% of this year and we will see it higher still in 2026. This is one of the main things we announced last fall that we would do, we would increase our reliance on the leisure part of our network.

And we also have established this AOC in Malta and we have secured contracts for four of our 10 aircraft on a long term contract, which will be very beneficial to play. And now on to the outlook for 2025. We feel that we are entering the summer season with a very strong well planned network and a balanced fleet deployment strategy that is split into these two pillars, six aircraft being of our own aircraft being operated from Kaplowik with the addition of one ACMI aircraft in Kaplowik. And then four operating ACMI projects with SkyUp. We are seeing continued improvements in RASK across each quarter of the year.

We are seeing stable, predictable and profitable income from the ACMI operation that we’re starting in two weeks’ time. And we can also report that collective labor agreement negotiations are progressing on the cabin crew side. An agreement has been signed and this is in the progress of being voted on. On the pilot side, we can say that negotiations are at an advanced stage. And financially, we expect to see operational improvements in all remaining quarters of the year.

And we can say we are on target to reach 15% to 20% reduction in overhead cost as we had reported earlier. And so what we feel should be the key takeaways from this announcement and presentation is that firstly things are progressing as planned. We are increasing the share of the leisure part of our network. We are focusing on the profitable routes cutting out the less so or the loss making ones. And we have deployed four of our aircraft in long term ACMI contracts.

Secondly, we are happy that the Q1 results are more or less exactly as we predicted three months ago. And so we are happy to that we are able to see at least one or maybe a couple of quarters ahead how things are progressing. And we can confidently say that we are on the right path. All signs indicate that the changes we are making in our business model will result in a much improved financial performance of the company. And we also see that our cash position is better than it was at the same time last year.

And we are ending this with I think identical or at least almost at identical slide as we’ve had for the past two quarters. Our cash position is now stronger than it was at the same time last year and our business outlook is much improved. PLAY prioritizes as ever cost control and effective working capital management to support our liquidity. We do continuously evaluate our financial position to ensure flexibility and stability. As part of this, the company may consider raising capital within the organizational structure depending on market conditions and strategic needs.

Thank you. You can send questions to it irflyplate dot com and I will try to answer them the best I can. So what are the revenue expectations from I’m already getting questions. What are the revenue expectations from the Sky of Malta ACMI contract? So we have previously reported that what we’ve seen typically in this business for the past few years is that ACMI providers seem to have been able to say profit roughly $1,000,000 per aircraft per year.

And we’ve also said that we are expecting to get similar results as we see in the business. Another question here is the market being so favorable for ACMI projects, are you confident you can have better yields operating leisure flights from Iceland instead of putting more in ACMI? I would say this is a fair question. So if the ACMI market is so great, why don’t we just place all the aircraft there? And the answer is, which already stipulated in the question, we are confident or yeah, we are confident that we can place at least several aircraft in Kerlavik flying point to point leisure flights with better results than the ACMI market seems to be able to give.

And it’s not just I think it’s not just a wishful thinking. This is just based on past results. With the new ACM agreement and fewer aircraft operating from Iceland, will you still be looking to operate new destinations? Also a fair question. The answer is yes.

We do expect to increase our leisure offering year on year, hopefully indefinitely. And this will presumably both be seen in added frequency on the better routes and we will continue to offer new destinations. We are expecting that the mean the Icelandic leisure market has been growing quite significantly over the past ten years or so and we don’t see why it should not continue to do so. With the increased wealth of people in the Western world and certainly in Iceland, we have seen an increased propensity to travel and I certainly expect that to continue. And we will take part in that and more than that I expect us to take an increased market share in this part of the business.

I don’t have further questions. And I don’t think we’ll give it much time because me staring at the camera isn’t so exciting. So I will thank you all who are watching this for taking the time. And thank you.

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