FIT FOR THE FUTURE BOGI NILS BOGASON | CFO ICELANDAIR GROUP

TRAFFIC UPDATE

HIGH SEASON

TRAFFIC DATA JULY AND AUGUST INTERNATIONAL FLIGHTS

CAPACITY UP BY 76% SINCE 2010

1,389 1,656

1,848 2,062

2,449

86.2% 85.3% 85.2% 85.9% 86.0%

0.0 %

10. 0%

20. 0%

30. 0%

40. 0%

50. 0%

60. 0%

70. 0%

80. 0%

90. 0%

100 .0%

0

500

1,0 00

1,5 00

2,0 00

2,5 00

3,0 00

2010 2011 2012 2013 2014

ASK'000

LF

TRAFFIC DATA JULY AND AUGUST REGIONAL AND GREENLAND FLIGHTS

CAPACITY DOWN BY 7% - ICELANDIC PAX DOWN BY 12% SINCE 2012

442 442 474

409 411

69.8% 73.1%

68.5% 73.6% 73.1%

-20.0%

80. 0%

0

100

200

300

400

500

600

2010 2011 2012 2013 2014

ASK'000

LF

TRAFFIC DATA JULY AND AUGUST CAPACITY – CHARTER

CAPACITY DECREASED BY 39% SINCE 2010- MAINLY CARGO

6,178 6,178 5,511

4,936

3,754

94%

93%

91%

95%

89%

80%

90%

100 %

0

1,0 00

2,0 00

3,0 00

4,0 00

5,0 00

6,0 00

7,0 00

8,0 00

9,0 00

10, 000

2010 2011 2012 2013 2014

Sold Block Hours

Fleet Utilization

TRAFFIC DATA JULY AND AUGUST HOTELS

CAPACITY UP BY 20% - UTILIZATION 5.9% HIGHER

644 699 741 760 774

82.8% 83.9% 88.2% 88.7% 88.7%

0.0 %

100 .0%

(100)

100

300

500

700

900

1,1 00

2010 2011 2012 2013 2014

AvailableHotel RoomNights

Occupancy

FINANCIAL

DEVELOPMENT

SUCCESSFUL OPERATIONS

Total revenues and EBITDA USD million | 2010-LTM Q414

681

791

899

1,023 1,073

96 85 110 144 141

2010 2011 2012 2013 LTM Q214

Total revenues

EBITDA

OUR SUBSIDIARIES REVENUE DEVELOPMENT

Total revenues per subsidiary USD million | 2010-2013

0

100

200

300

400

500

600

700

800

900

Icelandair Air Iceland IcelandairHotels

IcelandairCargo

Fjárvakur Iceland Travel Vita Loftleiðir IcelandairGroundServices

2010

2013

STRONG CASH FLOW FROM OPERATIONS

Cash from operating activities and uses of cash USD million | 2010 – LTM Q214

LTM = Last Twelve Months

41

125

96 114

86

45

49

45 33 81

6 12

19

128 117

167

231

251

2010 2011 2012 2013 LTM Q214

2010 2011 2012 2013LTMQ214Gross Capex Dept payments Dividend Cash from operations

296.8

60.2

15.6

283.3

1.1.2010 30.06.2014

Interest bearing debt

Cash and cash equivalents and marketabel securities

FINANCIAL LEVERAGE SYSTEMATICALLY MANAGED DOWNWARDS

1.2 x

1.4 x

0.9 x

0.6 x

0.3 x

2010 2011 2012 2013 LTM Q214

Interest bearing debt and available cash USD million | 1.1.2010 vs. 30.06.2014 Debt / EBITDAR

LTM = Last Twelve Months

-281.2 +267.7

FINANCIAL STRATEGY

AND HEDGING POLICY

On average have three

months cost as liquidity

30% can be in the form

of unused credit lines

Flexibility around

operational

assets

Equity ratio

no less than

35%

The goal is to pay

20-40% of annual

net profit as a dividend

MAINTAIN STRONG BALANCE SHEET

FINANCIAL STRATEGY

HEDGING POLICY TO REDUCE SHORT TERM VOLATILITY

4 months

to end of

December 2014

Fuel

49%

949-999

EUR/USD

60%

1.372

12 months

to end of

August 2015

Fuel

30%

939-999

EUR/USD

47%

1.366

Full year 2015

January - December

Fuel

14%

939-987

EUR/USD

42%

1.366

Fuel

ǀ 40 – 60%

ǀ Minimum 9 months, maximum 12 months

FX

ǀ 40 – 80%

ǀ Minimum 9 months, maximum 12 months

INVESTMENTS

AND FUNDING

BOEING 737 MAX 16 FIRM ORDERS – TOTAL INVESTMENT 1.6 BILLION USD BASED ON LIST PRICES

Delivery schedule 2018 - 2021

2018 2019 2020 2021

MAX 8

MAX 9

2009 2010 2011 2012 2013

31% 29%

$77

$62

$68

$104

$95

HISTORICAL INDUSTRY AIRCRAFT FINANCING REAL DEMAND SUPPORTED BY ADEQUATE FUNDING CAPACITY

30% 31% 23%

28% 24%

25%

21% 28% 14%

11%

10%

7% 5% 20%

26%

25%

25%

25%

11% 14%

5%

Cash Capital Markets Bank Debt Export Credit Lessor Self Fund

RJ Export Credit Manufacturer Tax Equity

Source: Boeing

$125 $129

$135 $139

2013 2014 2015 2016 2017 2018

INDUSTRY AIRCRAFT DELIVERY FINANCE OUTLOOK INCREASING DEMAND AND DELIVERIES DRIVING FINANCING REQUIREMENTS

28%

23%

25%

5%

14%

$104

$112

18%

25%

9%

22%

23%

Source:

Cash Capital Markets Bank Debt Export Credit Lessor Self Fund

RJ Export Credit Manufacturer Tax Equity

THE TOP 50 AIRLINES AIRFINANCE JOURNAL – THE AIRLINE ANALYST

Source: Airfinance Journal

THE TOP 50 AIRLINES AIRFINANCE JOURNAL – THE AIRLINE ANALYST

Source: Airfinance Journal

HISTORICAL AIRCRAFT FINANCING COSTS

LIBOR

0%

5%

10%

15%

20%

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Range of All-in Cost

for Aircraft Financing

Record Low

Levels

Source: Boeing

ICELANDAIR GROUP

Reykjavík Airport

101 Reykjavík Iceland

Tel: +354 50 50 300

Fax: +354 50 50 389

info@icelandairgroup.is

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