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Finnair Group Interim Report 1 January–31 March 2017

Tenth consecutive quarterly improvement; comparable operating loss almost halved in a seasonally challenging quarter

January–March 2017

  • Revenue increased by 3.3% year-on-year to 554.4 million euros (536.4)*.
  • Available seat kilometres (ASK) grew by 0.1%.
  • Comparable operating result was -9.0 million euros (-15.3).
  • Operating result was -10.0 million euros (-17.6).
  • Comparable EBITDAR** was 50.1 million euros (36.4).
  • Net cash flow from operating activities totalled 23.9 million euros (10.4), and net cash flow from investing activities amounted to 145.1 million euros (-247.3).***
  • Unit revenue (RASK) increased by 3.3% year-on-year.
  • Unit cost (CASK) increased by 2.0% and unit cost at constant currency excluding fuel increased by 1.2% year-on-year.
  • The 20-million euro cost-efficiency programme will be completed in full by the summer.
  • Ancillary and retail revenue per passenger grew by 9.4% year-on-year to 13.0 euros.
  • Earnings per share were -0.09 euros (-0.15).
  • Outlook unchanged: Finnair estimates that, in 2017, its capacity will grow 8–10%, weighted towards the second half of 2017. Revenue is expected to grow more slowly than capacity, reflecting both the increasing capacity in the markets Finnair serves in addition to Finnair's efforts to increase ancillary revenue.

* Unless otherwise stated, figures in parentheses refer to the comparison period, i.e. the same period last year.
** Operational result + depreciation + lease payments for aircraft.
*** Net cash flow from investing activities includes 186 million euro investments in money market funds and other financial assets maturing after more than three months. These investments are part of the Group’s liquidity management.

CEO Pekka Vauramo

Revenue grew in particular due to solid demand for Asian and Domestic flights. The passenger load factor rose and ancillary revenue per passenger also continued to increase. Our comparable operating result improved six million euros from the previous year. Hence, our result has now been on an upward trend for ten consecutive quarters.

Mid-winter is traditionally a weak period for Finnair due to seasonality, but we saw several positive signs during the quarter: the demand for travel to Europe seems to have stabilised, and sales in our key markets of China and Korea increased from the previous year. Our Asian flights were almost full during the quarter, with broadly unchanged average ticket prices. An increasing share of our Chinese passengers also continued their journey from Helsinki to our destinations in Finnish Lapland, and we carried some 40,000 more passengers on our domestic flights than a year earlier. For next winter, we are aiming to increase our capacity to Finnish Lapland even more. If our Lapland strategy continues to succeed, it will help to balance the seasonality of our business.

Strike actions by third parties at our Helsinki hub impacted our operations in March. We were forced to prepare for the strikes through various measures, and cancelled a large proportion of our flights on two separate days. We were able to contain the losses at approximately three million euros.

We achieved major milestones in our growth preparations. During the quarter, we took delivery of two A321 narrow-body aircraft and immediately after the period one new A350, which will increase our capacity quite significantly. Furthermore, we recently received our own A350 flight simulator, which has had an immediate, material impact on the efficiency of our pilot training program. In late spring, we will also receive a new narrow-body simulator, which will make us self-sufficient in terms of training. In addition, we now have new long-term collective labour agreements with our flying personnel groups, which improve the flexibility and of our operations in addition to allowing more planning efficiency and visibility. In-flight meal services were returned to Finnair’s control in April, and we are immediately taking development measures to serve our passengers better in this area, too.

Our accelerated growth is about to start. Our fleet is getting larger, personnel are increasing, and we are opening new routes and frequencies. This summer will be busier than ever. Finnair will fly to Asia 87 times a week. More and more of our routes will be operated with larger aircraft. We expect to reach 40,000 daily passengers at Helsinki Airport during this quarter. The launch of the new terminal wing at our hub in the summer will smooth our passenger journeys and improve the customer experience.


The demand outlook for passenger and cargo traffic in Finnair’s main markets continues to involve uncertainty. Finnair estimates that, in 2017, due to the fleet renewal and introduction of new aircraft, its capacity will grow 8–10 per cent, weighted strongly towards the second half of 2017. Revenue is expected to grow more slowly than our capacity, reflecting increasing capacity in the relevant markets.

In keeping with its disclosure policy, Finnair will issue guidance for its expected full-year operational result in connection with the half-year report in July.

Business environment

Traffic continued to grow in Finnair’s main markets in the first quarter of 2017. Measured in available seat kilometres, scheduled market capacity between Helsinki and Finnair’s European destinations grew by 2.8 per cent year-on-year, while direct market capacity between Finnair’s Asian and European destinations grew by 2.2 per cent year-on-year. Finnair’s market share decreased slightly both in European traffic and in Asian traffic, to 5.9 per cent (6.2).*

During the quarter, there were signs that the negative effect of previous years’ security concerns is dissipating. Asian demand came from several origins as traffic from Asia to Europe grew robustly during the quarter. In terms of destinations the Nordic growth trend continued as all Nordic countries enjoyed strong growth. In Finland, both Helsinki and Lapland destinations grew above average.

The market environment for the Atlantic Joint Business remained challenging as traffic between Europe and North America was affected by overcapacity and resulting price competition. The Siberian Joint Business continued to strengthen its position in traffic between Japan and Europe, and the total market volume also grew versus last year. Revenues increased both in Japan, driven by positive yield developments, and in Europe, driven by the increasing number of passengers.

The supply of packaged travel by tour operators active in Finland exceeded consumer demand during the first quarter, particularly in long-haul destinations, which weighed on prices and profitability. Consumer demand concentrated on the Canary Islands, which reduced the availability of moderately priced accommodation and tour operators' profitability. There was increased demand also for the United Arab Emirates, where the availability of accommodation and profitability were at a solid level. The air cargo market has bottomed out since the comparison period. On a global scale, growth has even exceeded the growth of world trade, indicating an increased market share. On the other hand, the air cargo market continues to suffer from overcapacity, affecting the yields.

The declining trend in the price of jet fuel ended in the first quarter of 2016. The dollar price of jet fuel was 50.4 per cent higher in the first quarter than in the comparison period. The US Dollar, the most significant expense currency after the euro, appreciated by 3.5 per cent against the euro year-on-year and has remained at historically strong levels. In regards to key income currencies, the Japanese yen was 5.0 per cent stronger against the euro than in the comparison period. The Chinese yuan has showed some signs of stabilization during the first quarter, depreciating by 1.7 per cent against the euro year-on-year. Finnair hedges its fuel purchases and key foreign currency items; hence, market fluctuations are not reflected one-for-one in its result.

* Based on external sources (capacities on SRS Analyzer data and market shares DDS pax estimates for JanuaryFebruary). The basis for calculation is Finnair’s non-seasonal destination cities.