Icelandic budget carrier Play insists its underlying performance remains strong, despite higher losses over the second quarter, as it transitions to a combined model of point-to-point services and wet-leasing.

The carrier is expecting “significantly reduced” losses for the upcoming winter season and “profitable operations” in 2026.

Four of its 10 Airbus A320neo-family aircraft are committed to a long-term damp lease with SkyUp Airlines, which commenced in May.

It has also freed two other aircraft for lease contracts – one of which has been placed – following its decision to withdraw from transatlantic flights.

The remaining four aircraft will operate directly for Play, on point-to-point routes out of Iceland, with the shift to this network completed by the end of October.

Play’s net loss of $15.3 million for the second quarter is deeper than the $10 million recorded last year.

But it claims this has been influenced by factors beyond its control, including a weaker-than-expected transatlantic market, exchange impact from a stronger Icelandic currency, and maintenance delays holding up one of its aircraft.

Play is absorbing costs from the transition, including the move to a single Maltese air operator’s certificate, while certain cost-saving measures have yet to take effect.

Chief executive Einar Orn Olafsson says the transformation is “unfolding as planned”.

“This shift is already visible in our forward schedule, with leisure routes making up a significantly larger share of our network in both [the third and fourth quarters] compared with last year,” he adds.

“While we faced temporary challenges this quarter…our underlying performance remains strong.”

Revenues for the quarter were down by 6.2% to $72.1 million while expenses fell by 3.1% to $71 million, as a result of the strategic model changes.

Olafsson points out that the airline has secured “strong backing” from its main shareholders and investors, with take-up of a IcKr2.4 billion ($20 million) convertible bond in July.

“This not only strengthens our cash position but also underscores continued confidence in Play’s strategy and future,” he says.

“We are well on our way to completing this business model shift. Our focus remains on executing with discipline – deploying capacity where returns are strongest, maintaining operational reliability, and diversifying our revenue base.”