Visitors boost economic recovery in Iceland

With NIB funding, recent capacity expansions at Keflavík Airport have increased comfort and convenience for travellers flying into Iceland, a country whose economy recovery has been helped by a thriving tourism industry.

In 2014, NIB and Isavia, the state-owned operator of Iceland’s airports, agreed on a 20-year, EUR 32 million loan for investments in Keflavík International Airport. Thanks to both increased transatlantic traffic and massive interest in Iceland as a destination in its own right, the airport has become busy in recent years.

Almost 99% of visitors arrive in Iceland through Keflavík International Airport, Iceland’s main international transport hub. This makes Keflavík the single most important piece of infrastructure needed to support Iceland’s tourism capacity.

“Iceland has benefitted from the airport investment programme because it has helped us deal with the big changes that have taken place in the tourism industry here. It has helped us meet ambitious targets for building the right kind of infrastructure to meet the demands of the airline industry”, explains Björn Óli Hauksson, CEO of Isavia, in an interview with NIB Newsletter.

“The investments in Keflavík have made it possible for the airport to grow in line with the increase in tourism in Iceland and also the huge rise in transatlantic traffic. Keflavík Airport is now a central hub for transatlantic flights and one of the top ten airports in regard to flights to North America.”

The investments include significant expansions to the Leif Erikson Terminal, appropriately named after the first European to arrive in North America. The results include a 5,000 m2 enlargement of the south building to the west, which adds six new gates and a waiting area for passengers, and allows the terminal to segregate passengers according to whether they are arriving from a Schengen area or a non-Schengen area. The investments are part of Isavia’s Masterplan for Keflavík Airport.

“The Masterplan is our growth and development plan for the next 25 years. It shows the optimal growth of the passenger terminal and the development of the airport as the amount of traffic begins to demand further facilities”, explains Mr Hauksson.

Looking ahead has indeed proved beneficial for Isavia. The new capacity expansions are just in time for Iceland’s biggest ever increase in tourism, now a sector that contributes significantly to the country’s economy. The number of foreign tourists has more than tripled since 2010, and 2016 saw around 1.8 million foreign visitors to Iceland, a 39% increase since 2015.

Even so, Mr Hauksson welcomes the interest. “Iceland has become one of the hot destinations in Europe, and people are very keen on coming here to experience the beautiful nature, good food and vibrant atmosphere. There are many reasons for this, but an important one is the work of many in promoting Iceland and successfully building a year-round tourism industry. Our work at Keflavík Airport has been to promote the airport to airlines and Iceland as an exciting destination, and we have made great progress in that. What we are particularly happy about is the increase in interest in flying to Iceland in the winter months, which is an excellent time to visit Iceland.”

Iceland experienced a severe economic depression when the financial crisis hit in 2008. It was not until March 2017 that the Icelandic government lifted the capital controls that had restricted financial flows in and out of the country since the crisis. Iceland now sees strong economic growth; GDP grew by 7.2% last year, and it is projected to grow by 6% in 2017.

“A key element in the recovery has been the rise in the tourism industry, which has contributed heavily to a rise in GDP and increased the number of jobs in the economy,” says Mr Hauksson.

In addition to Keflavík, NIB has provided loans to expand several other Nordic and Baltic airports. This experience is appreciated by Mr Hauksson, who also highlights NIB’s involvement as a stamp of quality in the eyes of decision-makers.

“It has been important for us to work with NIB, because they understand how important these investments have been for Iceland. Their trust has enhanced the confidence of policymakers and the tourism industry in the Keflavík project, which has helped us make it a reality.”

Isavia is the state-owned operator of all airports and air navigation services in Iceland.