Corporate loyalty – Iceland Air nationalised

The new bank Íslandsbanki hf. (used to be called Glitnir) took over 47% of Iceland Air. The only major airline to fly to and from Iceland on a regular basis. The new bank is owned by the government so the airline has in that sense been nationalised.

The news did not come as a surprise for the owners who lost the assets to the bank. Most of them are in deep trouble because of ludicrous investments that led to the collapse of the Icelandic economy. This is not a surprise for anyone, since this has been “talked about” for a while in the media and among people in the streets.

The first quarter report indicated that the business had been better than expected. The bank and other owners are currently overhauling the business model and finances of the company, and according to sources that is going well. The bank is willing to continue the work of financial reconstruction with the rest of the owners.

Icelandair Group registered at the Nasdaq OMX stock market, and the shareholders are around 850. The plan is to keep the company registered at Nasdaq and the bank shares will be sold on the open market as soon as possible.

The Icelandic Financial Supervisory Authority gave a green light for the takeover, but gave the bank only 30% vote against other shareholders.

What is interesting to think about is the consumer loyalty of Iceland Air. In the UK for example Marks & Spencer is the darling of the British consumer. When they are doing poorly, the Brits flock to their aid and buy from them. This loyalty is admirable for a company to have. I like M&S personally, and shop there every time I go the UK.

This is not true for Iceland Air. The company has had the cheepest flights over the Atlantic for years. It is relatively cheap for the people in the USA and Europe to cross the ocean with Iceland Air. The locals have another story to tell. The company has for years had a monopoly in Iceland on air travel, so we have to pay double or triple what others have to pay to use their service.

Most Icelanders are forced to use their service and they have the reputation of being both nasty and unfair when something happens. Costumer relations are not their strong side. The monopoly status gives them the power to be arrogant.

Hopefully this will change with new owners and different market situation.


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