Good morning and welcome to our presentation of the Q3 results. I am Bogi Nils Bogason, CEO of Icelandair , and as usual, I have here with me our CFO, Ívar S. Kristinsson. We will begin with a presentation of the results, and that will be followed by a Q&A session. Please send us your questions to the email address ir@icelandair.is. First of all, here we see a snapshot of our performance in Q3. Revenue increased despite fare pressure on the transatlantic market, resulting in a record positive revenue of ISK 522 million, with RASK up by 4%. However, costs were negatively affected by several factors, such as strong Icelandic krona, salary increases, cost inflation, and some non-recurring items. CASK was up by 6%, which led to the results for the third quarter being a little bit below last year.
EBIT amounted to ISK 74 million, with a net negative currency impact on that amount of ISK 10 million. Net profit was ISK 58 million, decreasing by ISK 11 million between years. We saw improved efficiency in our operations, which was reflected in better resource utilization than last year and outstanding on-time performance. This year, we were rated the most punctual airline in Europe in April, June, July, and September. Thank you, team, for the great work that made this possible. Finally, we maintained a very strong liquidity of $ 503 million at the end of the quarter, improving by ISK 107 million compared to the same time last year. Please, Ívar, take us through the financials.
Thank you, Bogi. Let's start with taking a glance at the traffic figures. In the passenger network, our capacity measured in ASKs rose 2%, and so did the traffic measured in revenue passenger kilometers as well. That resulted in a stable load factor year-on-year of 85.9%. The number of passengers was over 1.7 million, grew 2%. The passenger segment grew by 17% and was 38% of the total, while from grew 11%. At the same time, the via segment reduced by 11%. Passenger numbers within Iceland grew by 2%. On the CO2 emissions per OTK, that was down 4% year-on-year, reflecting improved fleet efficiency as well as operational improvements. The highlights of the income statement, as Bogi mentioned, the EBIT was ISK 74.4 million, down from ISK 83.5 million last year. That was driven by worse performance of the route network, and the EBIT margin was 13%.
Total revenue increased 6%, with a growth driven primarily by strong demand to and from Iceland. Passenger revenue reached a record of ISK 522 million, up 5%. Passenger revenues increased in all the markets except the via market, as mentioned before. Cargo revenue ISK 18 million, 7% increase driven by strong imports. Leasing revenue ISK 22 million, up 5%, reflecting a continued strength in the leasing business. Other income ISK 23 million, up 38%. Of that, the tourism revenue in this category was ISK 10 million and increased 50% year-on-year. For the costs, total operating cost increased by 9% to ISK 465 million. There were some adverse factors that contributed to the increase, with the largest one being the negative currency development, which added about ISK 16 million in costs and impacted all of the major cost categories year-on-year.
Salaries and related costs increased by 13% to ISK 150 million due to the contractual wage increases and the strong krona. If we eliminate the currency development, then at fixed exchange rate, the increase would have been 5%. Fuel costs were down 5% as fuel prices have gone down. I will go a little bit deeper into that on the next slide. In the meantime, other aviation expenses, ISK 107 million, up 13%. That included higher variable flight costs that were up 7%, partly due to the adverse currency development. Maintenance costs rose, and the explanation for that is mainly due to unscheduled engine maintenance on our MAX aircraft. We had, under other aviation expenses, unforeseen short-term lease costs in August due to a repair of one of our Boeing 767 aircraft, which resulted in us having to lease an aircraft for more than a month.
Other operating expenses were up ISK 18 million. That was due to the adverse currency impact, increase in air ops cost, and one related to our transformation program. Depreciation was ISK 46 million, up from ISK 43 million last year, reflecting more leased aircraft assets on our balance sheet as we have continued to renew the fleet. Net finance expenses were ISK 2.6 million, up ISK 0.8 million year-on-year, and all that resulted in a net profit of ISK 57.3 million, down ISK 11.9 million year-on-year. It's worth mentioning and looking at the fuel cost development. Overall, costs were ISK 119 million, decreasing 5%, and that was influenced by a few things, as you can see on the bridge there. The continued fleet renewal, as I mentioned before, now with the new Airbus A321LRs that we added earlier this year, is improving the fuel efficiency.
Combined with improvement in our fuel program, these changes support both the cost reduction as well as our long-term sustainability goals. On the other hand, we did see some upward pressure from sustainability-related costs. Carbon emission costs increased due to the market price of those credits having increased from last year. There were fewer allowances allocated to Icelandair this year, and we had some costs being settled for ETS, for the emission system from earlier periods. Additionally, the use of sustainable aviation fuel and compliance with the CORSIA program added around almost ISK 2 million to the costs. EBIT, and if we look at the development year-on-year, then it is clear that when we exclude the impact of the currency movement, the underlying EBIT shows some improvement.
That improvement is partly driven by the positive effects of our transformation program, resulting in labor cost efficiencies and other operational enhancements that are now recurring and will continue to support our performance going forward. Stronger unit revenue also contributed to the EBIT. We had the inflation in the aircraft operating environment, so to speak. We also incurred some non-recurring costs, including the transformation expenses and short-term lease of our 767 aircraft for a whole month, as I mentioned before. Depreciation higher due to the fleet renewal, but in other cost items, we are seeing this investment starting to contribute to improvements in other areas, such as fuel efficiency and lower fuel prices, and improved operational efficiencies delivered ISK 12.5 million in positive impact on EBIT. Those fuel-related initiatives, that is. Unit revenue increased 4%, primarily driven by the higher share of the passengers traveling to and from Iceland.
We saw the average yield improve 3% year-on-year. As we have been seeing in previous quarters, the premium cap in performance is outpacing the economy performance, and surplus revenue grew by 11% in this quarter. Unit costs increasing by 6%, and the adverse currency development was by far the largest contributor. Looking at it on a fixed exchange rate basis, the increase would have been around 2%. As previously mentioned, fuel costs declined, however, inflationary pressures are weighing in on the cost. The improved labor efficiency, where we had 2% fewer FTEs while producing 2% more, had a positive impact on the unit cost development. The cargo and leasing segments both delivered strong performance in the quarter. Production growth notable in both segments. Block hours in leasing rising by 23%, freight ton kilometers increasing by 10%.
The cargo segment continues to improve year-on-year, with full-year profitability now expected to surpass the last year levels, and again, strength especially on the import side. Leasing revenue ISK 22 million, 5% increase, and the leasing business delivering an EBIT margin of 21%. The outlook there is quite good, both with customers that have aircraft under long-term contracts, as well as for our VIP projects, where we are building quite a strong reputation in that market. Net cash to operation ISK 26 million. Net cash used for investing or the CapEx ISK 16 million, and those investments primarily are directed towards fleet renewal and maintenance. Financing activities ISK 28 million, mainly due to repayment of interest-bearing loans and lease liabilities. At the end of the quarter, cash and marketable securities were at ISK 410 million, improving by more than ISK 100 million year-on-year.
That improvement both due to stronger operating cash flow than last year and less investments to date. If we include the ISK 92 million in untrunk committed credit lines, then our total liquidity was a little more than ISK 500 million at the end of the quarter. Just briefly on the balance sheet, ISK 1.9 billion in total assets, up ISK 285 million since the beginning of the year. That is mainly driven by the addition of three Airbus aircraft, the A321LRs, and also increasing cash and marketable securities, and then on the liability side, the increase in lease liabilities. At the end of the quarter, equity ISK 339 million, equity ratio 18%, up from 16.4% at the start of the year and on a similar level as last year. Over to you, Bogi, for the business outlook.
Thank you, Ívar. About the business update and the outlook, after eight years of unsustainable financial performance, our focus is now very clear, and it is to turn the company around to profitable operations. We have to do that no later than next year. To achieve this, we have taken various actions regarding our route network, our fleet, and by improving efficiencies and revenue generation through our ONE Transformation program. Let's start with our route network and the capacity development. After a significant increase in capacity to and from Keflavík over the past years, the situation is changing this year, or this year, 2025. As you can see, capacity decreased in all months this year, except in April and May, which is explained by the Easter traffic and the earlier start of our second connecting bank.
As a result of these changes, our leading hub carrier position is strengthening to almost 70% in Q4 2025, and it will remain at a similar level throughout the next year. As we see it under the current market conditions and how we manage the network, we are planning a modest growth of 2% for next year, 2026, compared to 8% growth this year. This growth will be focused on shoulder and low seasons, which will continue to improve our resource utilization all year round. Our focus is first and foremost on the markets to and from Iceland, where we are increasing capacity to Southern Europe and Scandinavia, and reducing slightly to North America while the conditions are challenging on the transatlantic market.
We are also reducing our fleet by two aircraft, and we decided to cease the operations of our Boeing 767 widebody aircraft by the end of next year. All in all, we will offer 6.3 million seats to over 60 destinations next year, with more than 800 connecting options within the route network. Venice and Faro have been introduced as new destinations for next year. A bit more on our fleet development. Next summer, we will operate 41 aircraft in the passenger network. It includes 21 Boeing 737 MAX and seven Airbus A321LRs, with three new Airbuses coming in in the first quarter next year. Four Boeing 757s and one Boeing 767 will be retired this winter. As mentioned before, all 767 widebody operations in the passenger network will end by 2026. That decision contributes to a more unified and thereby efficient fleet.
Next year, the average age of the fleet will be nine years compared to 20 years in 2018. We are working on transforming the company for the future. Improving the competitiveness of the company is a clear priority, and our transformation program aims at driving efficiencies, reducing costs, and unlocking new revenue opportunities. So far, we have identified over 500 initiatives, and at the end of Q3, we had implemented over 200 of them. They are expected to deliver around ISK 100 million annually. The program has already delivered an actual impact of around $50 million. A few examples of projects are increased optimization, fine-tuning of our product and service, and the expansion of our shared service center in Tallinn. Fuel efficiency remains a top priority, driven by both cost savings and sustainability. In addition, we are entering a critical negotiation phase with our key unions.
It is crucial that together we reach long-term agreements that support both fleet and network expansion and will ensure operational flexibility in line with industry standards in our key markets. On the revenue side, we are, for example, strengthening our ancillary revenue through dynamic pricing, upselling strategies, and product refinements. Now, to the financial guidance for the full year 2025. The revenue outlook for the quarter and for the fourth quarter is improving, and the outlook in cargo and leasing is quite good. Based on the assumptions that the Icelandic krona will remain quite strong for the next two months, we expect EBIT to be - ISK 10 million to -ISK 20 million for the full year. In summary, in Q3, we delivered a net profit of ISK 58 million and year-over-year revenue growth. Cost was negatively impacted by several factors. However, liquidity reached a record high at the quarter end.
Changes in capacity to and from Iceland have reinforced our position as the leading hub carrier here in Keflavík, now holding around 70% market share. However, competition remains intense, with around 25 airlines serving Iceland next year, making competitiveness our top priority. We have already taken decisive actions across our route network, fleet, and operations, driving efficiencies, reducing costs, and unlocking new revenue streams. Our focus remains firmly on what we can control as we actively transform the company for the future. As stated earlier, next year is vital for Icelandair. After eight years of unsustainable results, there is a need to turn the ship around, and we are committed to doing exactly that. That concludes the presentation, and I hope we will have some interesting questions.
Yes, we have already some questions. First of all, as the transatlantic business remains under pressure, will some routes maybe be reduced, and how will it develop going forward?
As I said during the presentation, we are cutting capacity slightly to North America next year while the situation is challenging there, and we have decided to cut Detroit, at least temporarily, out of the network. We are not serving Detroit next year. We are seeing around 3%- 4% capacity increase on the transatlantic market into 2026. Airlines flying on the transatlantic market are seeing the same as we are, decreasing yields and so on. As we've been seeing in the past, it's quite likely that into the future, the situation will balance there or be more balanced there.
A bit on the Play situation and the changed landscape in Keflavík, how do you see this develop and continue to change?
Our market or our leading hub position there has strengthened, and that is quite important and brings us into a better position. Now we have around 70% share of the capacity in Keflavík. As we all know, Play had already downsized quite a lot. Their plans before they went out of business were reflected in that they were the fourth largest airline out of Keflavík in November and into next year. The change was not as big as if this would have happened a year or two years ago when they were operating 10 aircraft. The market is very dynamic. There is still a fierce competition into Keflavík, but our position has definitely strengthened.
When do you expect results from the negotiations with the unions?
The agreements with the cabin crew union and the pilot union expired at the end of the quarter, end of September. We are just starting the negotiations now, and it remains to be seen how long it will take for us to reach a conclusion. As I said, it's very important for both the company and the unions that we will reach a conclusion that will bring the company into a more competitive position. We have been seeing cost increases all around us, high salary increases here in Iceland. We have to bear this in mind when we go into the negotiations. When we conclude, it's hard to say.
Could you give an update on the fleet delivery schedule?
Yeah, I can do that. We are foreseeing that we'll take delivery of three A321LRs for the summer. As it stands now, it seems that the deliveries will be on schedule now in December and January for the three aircraft.
Yes, next question. It seems your fuel hedges haven't changed at all since July. Is that a strategic decision or a bet on your behalf?
No, I would not say it's a bet. We have a strategy that we work after. There is some flexibility in that. Fuel prices have been quite stable throughout the summer. We had kind of built quite a good positioning on the hedging leading into that. That's the reason why we haven't added to any hedges since then. We will just continue to act according to our hedging strategy. That basically says that 12 months ahead, we are hedging up to 50% of the requirement.
In light of weak performance and the fleet reduction next summer, do you expect to make any layoffs?
We are in a dynamic industry, in a dynamic environment, a big company on the Icelandic scale. We can't promise that we will go through some changes, but nothing has been decided in that respect. We have to just adjust to the environment that we are in.
Some investors are increasingly worried that you might need to raise equity. How comfortable are you with your current equity and liquidity position?
We are very comfortable with the current liquidity and equity position. As we went through, we have never seen such a high liquidity at the end of the third quarter. The liquidity position is strong and the equity ratio is healthy. As we mentioned a few times during the presentation, we need to improve the profitability of the company, and we need to do that latest next year. That is our plan and that is our goal. I'm convinced that we will be able to do that. The balance sheet currently is very strong and we need to improve the profitability.
Following up on the previous question, are you looking into selling any non-core assets such as the headquarters?
Would you like to do?
Yeah, at the moment, no, we don't have any plans on doing that. We have explored possibilities to either do a sale or lease back or just finance the headquarters. As Bogi mentioned, currently our liquidity is very strong, and with just the overall situation, high interest rate in Iceland and all that, it's not the best time to go into the sale or lease back deal. As of now, we are not planning to do that.
That concludes the questions today. Thanks.
Thank you very much for attending. Looking forward to seeing you latest January. Thank you very much.