finnair ir q4 fy en/media/files/f/finnair-ir/...source: airbus global market forecast september...
TRANSCRIPT
1
2012 Result
Mika VehviläinenCEO
Agenda
• Market environment in Q4
• Business performance and strategy execution
• Outlook
• Financials
Finnair FY 2012 Result, 8 February 20132
Market Environment
According to IATA,
• Global air travel continues to increase, but the rate of growth has slowed over the year
• Air freight demand showed year-on-year improvement in Q4 after being down in previous quarters
• Growth in international passenger travel was driven by emerging regions
• Airline capacity management has allowed load factor to remain solid, helping financial performance
• Given the weakness in global economic growth, the demand environment for air transport remains fragile
Finnair FY 2012 Result, 8 February 20133
Air traffic remains a growth market
Finnair FY 2012 Result, 8 February 20134
Source: Airbus Global market forecast September 2012.
20-year world annual traffic growth
4.7%
Growth is highest in emerging regions
Finnair FY 2012 Result, 8 February 20135
Source: Airbus Global market forecast September 2012.
ChinaIndiaMiddle EastAsiaAfricaCISLatin AmericaEastern EuropeE
MER
GIN
G R
EG
ION
S
6billion people
2012
Yearly RPK growth 2012 -2031
Western EuropeJapanNorth America
1billion people 2012
Billions of people want to travel by air
China is forecasted to continue as the fastest growing market in 2012-2013
Finnair FY 2012 Result, 8 February 20136
Source: Airbus Global market forecast September 2012.
Main drivers for traffic growth in Asia
• More people, bigger cities, more wealth
• Emerging markets, more first time flyers and growing middle class
• Growing tourism and internationalisation will stimulate demand
• China average propensity to travel x4.6 in 2031 vs. 2011
Finnair FY 2012 Result, 8 February 20137
Source: Airbus Global market forecast September 2012.
Change in the industry continues
• Alliance landscape is changing– Qatar to join oneworld alliance, Middle-Eastern airlines active in
partnering with network carriers– Malaysia Airlines became a full member of the oneworld alliance in
January
• Market exits in short haul traffic
• Network carriers continue to restructure their loss-making short haul operations
Finnair FY 2012 Result, 8 February 20138
9
Solid business performancestrengthens Finnair’s position in
the market
Finnair FY 2012 Result, 8 February 2013
Full year 2012 back in profit
• Q4 and FY Operational EBIT in profit• Over €100 million result improvement while the fuel bill
grew by €115 million– Q4 Turnover 612.9 M€, Operational EBIT 6.3 M€– FY Turnover all time high 2449.4 M€, Operational EBIT 44.9 M€
• Stable financial position– Net cash flow from operations 17.9 M€ in Q4, 154.7 M€ FY– 430.5 M€ short-term cash and cash equivalents as per 31 Dec 2012
(approx. 17.6% of FY turnover)
• Notable improvements in traffic performance trough out the year:– Load factor +4.3%-p– RASK +7.7%
Finnair FY 2012 Result, 8 February 201310
Turnover growth continued, EBIT* back in profit
Quarterly turnover, € million
11 Finnair FY 2012 Result, 8 February 2013
Quarterly Operational EBIT, € million
-60
-40
-20
0
20
40
60
2008 2009 2010 2011 2012
Q1 Q2 Q3 Q4
0
100
200
300
400
500
600
700
2008 2009 2010 2011 2012
Q1 Q2 Q3 Q4
*Operational result (EBIT), excluding non-recurring items, capital gains and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves
Operational EBIT build-up in Q4 2012
Finnair FY 2012 Result, 8 February 201312
-31,6
6,3
11,7
16,7
10,5
-16,9
3,6 -1,9
-18,7
31,6
17,3
-6,8-9,3
-40,0
-20,0
0,0
20,0
40,0
60,0
80,0
Mill. Eur
Operational EBIT build-up in FY 2012
Finnair FY 2012 Result, 8 February 201313
-60,9
44,9
34,4
37,0
21,4
-38,2
-14,4-3,6
-115,0
179,4
28,6
4,8
-28,6
-100,0
-50,0
0,0
50,0
100,0
150,0
200,0
250,0
300,0Mill. Eur
14
Unit revenue improvement continues
RASK+7.7%
PLF +4.3%-p
RPK yield+0.9%
Finnair FY 2012 Result, 8 February 2013
• Unit revenue per available seat kilometre (RASK) up by 7.7% in 2012 as both passenger load factor (PLF, +4.3%-p) and yield per revenue passenger kilometre (RPK yield, +0.9%) improved y-o-y
Strong traffic performance in Q4 2012
North America
ASK -2,5 %
RPK 3,7 %
PLF 4,9 %-p
Traffic revenue* -3,2 %
Leisure traffic
ASK -7,8 %
RPK 1,9 %
PLF 8,3 %-p
Traffic revenue* -1,9 %
Europe
ASK 7,5 %
RPK 11,7 %
PLF 2,6 %-p
Traffic revenue* 11,7 %
Total traffic
ASK 3,8 %
RPK 9,6 %
PLF 4,0 %-p
Traffic revenue* 6,2 %
Asia
ASK 7,0 %
RPK 12,3 %
PLF 3,6 %-p
Traffic revenue* 5,5 %
Domestic
ASK -7,9 %
RPK 0,8 %
PLF 5,3 %-p
Traffic revenue* 3,2 %
Cargo
ATK -45,2 %
RTK -36,9 %
OLF 10,9 %-p
Traffic revenue -37,3 %
Asian share 49.8% of the total capacity
* passenger revenue
15Finnair FY 2012 Result, 8 February 2013
Passenger revenue split
44%
34%
11%
8% 3%
Asia
Europe
Charter
Domestic
North Atlantic
*Passenger revenue
16
Strategy implementation yielding results
Finnair FY 2012 Result, 8 February 2013
Finnair today
• Focus on core Airline business– Scheduled long and short haul traffic– Leisure traffic– Cargo traffic
• Partnerships in both core business and in airline support services
Finnair FY 2012 Result, 8 February 201317
We are committed to adding value and improving our profitability
• Service development:– Customer Service quality– Product renewal and new ticket types– More rewarding Finnair Plus Program– Marimekko partnership
• Cost efficiency and flexible cost structure• Operational efficiency• Increasing revenues
Finnair FY 2012 Result, 8 February 201318
Implementation of cost savings program ahead of schedule, €100 million of realised savings in 2012
25%
24%
14%
10%
9%
8%
8% 3%
Target €140 million
maintenance staff
other lease
sales catering
ground handling fuel
Finnair FY 2012 Result, 8 February 201319
138%
41%
98%
97%
161%
102%
50%
30%
73%
28%
50%
12%
18%
8%
8%
0% 100%
fuel
ground handling
catering
sales
lease
other
staff
maintenance
TOTAL
Achieved savings to target
achieved
implemented
to target
€40 million€100 million
New €60 million savings programme will ensure reaching our target of 6% operational EBIT margin
• The aim is to achieve a permanent reduction in costs of €60 million by the end of 2014
• The new programme complements the existing €140 million programme launched in 2011
Finnair FY 2012 Result, 8 February 201320
€60 million
2014 201520132012
Savings timeline for in total €200 million sustainable savings from 2010 cost level
Finnair has strong presence in Asian key economies, weekly frequencies in Q4*
Finnair FY 2012 Result, 8 February 201321
24
4034
2427
Finnair Lufthansa Air France KLM IAG
China Japan
Republic of Korea
5
12
7 7
Finnair Lufthansa Air France KLM
19
27
2116
Finnair Lufthansa Air France KLM
6
87 7
Finnair Lufthansa Air France KLM
Singapore
• *Finnair was the 3rd largest carrier in its destinations, estimated market share of 5.4% in 2012.• Market size of 20 million transfer passengers annually, globally one of the fastest growing traffic areas. • Traffic between Europe and China forecasted to triple during the next 30 years.
Finnair FY 2012 Result, 8 February 201322
Adding value to our customers
Outlook for 2013
• The uncertain economic outlook in Europe, together with weakened consumer demand and slower growth in Asia, make it difficult to assess how air traffic will continue to develop. Fuel costs are expected to remain high in 2013, and the demand for air traffic is estimated to grow in moderation.
• Finnair estimates that its turnover will grow in 2013. The airline unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared with 2012, and operational result is expected to show a profit in 2013.
Finnair FY 2012 Result, 8 February 201323
Financials
24 Finnair FY 2012 Result, 8 February 2013
Key figures Q4 & FY 2012
Key Figures Oct-Dec 2012
Oct-Dec 2011
Change %
FY 2012
FY 2011
Change %
Turnover and result
Turnover EUR million
612.9 577.4 6.1 2 449.4 2 257.7 8.5
Operational result, EBIT EUR million
6.3 -31.6 44.9 -60.9
Operational result, % turnover % 1.0 -5.5 6.5 %-p 1.8 -2.7 4.5 %-p
Operating result, EBIT EUR million
2.7 -30.1 35.5 -87.8
EBITDAR EUR million
55.0 26.4 108.3 241.9 139.6 73.3
Result before taxes EUR million
0.9 -38.2 16.5 -111.5
Net result EUR million
1.2 -32.6 11.8 -87.5
Balance sheet and cash flow
Capital expenditure, CAPEX EUR million
23.7 31.9 -25.7 41.4 203.9 -79.7
Net cash flow from operating activities EUR million
17.9 -1.2 >200 % 154.7 50.8 >200 %
Share
Share price at end of quarter EUR 2.38 2.3 3.5 2.38 2.30 3.5
Earnings per share, from the result of the period* EUR 0.01 -0.25 104.0 0.09 -0.69 113.0
Earnings per share EUR -0.06 -0.27 77.8 0.02 -0.75 102.7
25 Finnair FY 2012 Result, 8 February 2013* Before Hybrid Bond interest
Airline business: RASK & CASK development Q4 2012
4,8 %
-2,9 %
-8,6 %
11,8 %
-11,4 %
-11,5 %
-7,0 %
19,9 %
-14,6 %
-16,8 %
-15,8 %
-20% -15% -10% -5% 0% 5% 10% 15% 20%
RASK, unit revenue
CASK, unit cost
CASK, excl. Fuel
Fuel cost
Personnel
Depreciation & leasing
Traffic charges
Maintenance
Ground handling
Catering
Other costs
Change, y-o-y, %
26 Finnair FY 2012 Result, 8 February 2013
• Unit revenue per available seat kilometre (RASK) up by 4.8%• Unit cost per available seat kilometre excluding fuel (CASK, excl. fuel) down
by 8.6%
Airline business: RASK & CASK development FY 2012
7,7 %
2,3 %
-3,6 %
18,1 %
-1,2 %
-7,9 %
4,1 %
3,8 %
-4,5 %
-11,0 %
-9,2 %
-20% -15% -10% -5% 0% 5% 10% 15% 20%
RASK, unit revenue
CASK, unit cost
CASK, excl. Fuel
Fuel cost
Personnel
Depreciation & leasing
Traffic charges
Maintenance
Ground handling
Catering
Other costs
Change, y-o-y, %
27 Finnair FY 2012 Result, 8 February 2013
• Unit revenue per available seat kilometre (RASK) up by 7.7%• Unit cost per available seat kilometre excluding fuel (CASK, excl. fuel) down
by 3.6%
Operational costs flat, fuel costs continued to climb in Q4 2012
Operational costs
580,8 621,7
557,2 586,1
584,2603,5
613,4615,7
0
500
1000
1500
2000
2500
3000
2011 2012
Q1 Q2 Q3 Q4
2,427.0
Mill. Eur
132,8 167,6131,7 157,9144,3
179,6146,4
165,2
0
500
1000
2011 2012Q1 Q2 Q3 Q4
670.3
Mill. Eur
2,335.6
555.2
+0.4%
+20.7%
* Hedging taken into account
Fuel cost +12.8 % y-o-y*• The share of fuel costs 27%
28 Finnair FY 2012 Result, 8 February 2013
Fuel and personnel biggest cost items in Operational costs Q4 2012, total of 615.7 Mill. Eur
Finnair FY 2012 Result, 8 February 201329
Change, y-o-y, %
-15,9 %
-24,1 %
-33,8 %
-16,1 %
21,3 %
-6,6 %
17,7 %
-2,6 %
-14,8 %
12,8 %
0,4 %
-40% -20% 0% 20% 40%
Aircraft leasing
Sales and marketing
Tour operations
Depreciation
Other rental payments
Maintenance
Traffic charges
Ground handling and catering
Other costs
Staff
Fuel
Total
55,6 %
26,8 %
16,3 %
10,2 %9,9 %
8,4 %
7,7 %
6,2 %
5,5 %
3,7 %2,8 % 2,4 %
Fuel Staff
Other costs Ground handling and catering
Traffic charges Maintenance
Other rental payments Depreciation
Tour operations Sales and marketing
Aircraft leasing
Our financial targets
• Operational profit (EBIT) margin 6%
• EBITDAR margin 17%
• Economic profit
– To create positive value over pretax WACC of 8%
• Adjusted gearing <140%
• Dividend policy pay-out ratio minimum one third of the EPS
Finnair FY 2012 Result, 8 February 201330
Strong financial position supports business development and future investments
-20
0
20
40
60
80
100
120
2008 2009 2010 2011 2012
Strong balance sheet
Equity ratio Gearing Adjusted gearing
%
Finnair FY 2012 Result, 8 February 201331
-150
0
150
300
450
600
750
2008 2009 2010 2011 2012
Good cash position over years despite significant investments
Net cash flow from operations
Investment, gross
Short term cash and cash equivalents
M€
Fuel, spot-price development
32 Finnair FY 2012 Result, 8 February 2013
Hedging profit of €10 million in Q4
33 Finnair FY 2012 Result, 8 February 2013
146*165**
6 -4 710
0
50
100
150
200
Q4/2011 Volume Price Currency HedgingDeviation
Q4/2012
Mill. €
*Incl. Hedging profit of 20 Mill. EUR
**Incl. Hedging profit of 10 Mill. EUR
555*670**
31 554 25
0
100
200
300
400
500
600
700
800
2011 Volume Price Currency HedgingDeviation
2012
Mill. EUR
Hedging profit of €51 million in 2012
*Incl. Hedging profit of 76 Mill. Eur
**Incl. Hedging profit of 51 Mill. Eur
Fuel cost build up LTM
Rolling hedging policy
Hedging positions, 31 December 2012 Hedge ratio H1 2013: 75%
35 Finnair FY 2012 Result, 8 February 2013
• Finnair hedges jet fuel positions 24 months ahead within the limits defined in the hedging policy
• Finnair is 75 % hedged for the first 6 months and 67% for the first 12 months
• The company protects itself against the risks of currency, interest rate and jet fuel positions by using different derivative instruments, such as forward contracts, swaps and options