October 10, 2008 / 3:52 PM / 11 years ago

Iceland businesses feel sting of financial crisis

REYKJAVIK, Oct 10 (Reuters) - Businesses beyond Iceland’s banks began feeling the sting of the island’s financial crisis, as Icelandair said domestic demand had slumped and a leading publisher said it was closing a newspaper and cutting jobs.

“Domestic demand has dropped quite dramatically in the past few days due to the events,” Icelandair (ICEAIR.IC) spokesman Gudjon Arngrimsson said on Friday. “But demand internationally is up versus last year.”

Arngrimsson said some 35 percent of Icelandair’s passenger numbers come from people leaving the country, while 65 percent are from flights to Iceland or flights which stop over on their way between Europe and North America.

“Of course we are affected (by the crisis), but we’re getting decent traffic from other markets,” he said. “We are trying to let the weak crown help us.”

Given the uncertainty, Arngrimsson said it was impossible to predict whether the company will be profitable this year. Asked about the firm’s liquidity, he said: “Our situation is all right in that regard.”

In an another instance of how the financial crisis is affecting businesses on the island, whose banking system has crumbled over the past few days, media publisher Morgunbladid said it was cutting jobs and combining some of its operations with peer 365 Media.

The daily newspaper 24 Stundir, published by Morgunbladid, would cease publication as of Friday, resulting in 20 jobs being cut, Morgunbladid said on its Web site. (Reporting by Brett Young and Omar Valdimarsson; Writing by Niklas Pollard; Editing by David Holmes)

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