finnair q3 result info/media/files/f/... · change % 1–9 2014 1–9 2013 change % 2013 turnover,...

FinnairQ3 result info31 October 2014CEO Pekka VauramoCFO Erno Hildén

1 Finnair Q3 Result, 31 October2014

Difficult market environment especially in Finland prevailed• The weakness of the Finnish economy was reflected in home market demand, in both business

travel and leisure traffic.• Growth in the BRICS economies, including China, slowed.• Several income currencies weakened against Euro.• The price of jet fuel remained high despite its decrease.• Cargo traffic continued to suffer from overcapacity and negative exchange rate development. • Capacity growth in the market was mostly conservative.

– Measured in seat kilometres, market capacity between Helsinki and Finnair’s European destinations grew by approximately one per cent.

– Market capacity between Finnair’s Asian and European destinations grew by 3.3 per cent. – Finnair increased its market share in European traffic, while in Asian traffic market share decreased slightly

year-on-year.*

Finnair Q3 Result, 31 October20142

*Finnair’s estimate based on MIDT data collected on the sales volumes of travel agencies and Finnair’s estimates of airlines’ sales through their own sales channels, such as websites.

Weak domestic market and exchange rate fluctuations contributed to decline in traffic revenues in Q3

3

North-Atlantic**

ASK -6.0 %

RPK -8.6 %

PLF -2.5 %-p

Traffic revenue* -6.8 %

Charter traffic

ASK -29.9 %

RPK -31.8 %

PLF -2.5 %-p


Europe

ASK 12.1 %

RPK 10.8 %

PLF -0.9 %-p

Traffic revenue* 4.8 %

Total

ASK -0.7 %

RPK -0.5 %

PLF 0.1 %-p


Asia

ASK -3.7 %

RPK -1.2 %

PLF 2.3 %-p


Domestic

ASK -0.1 %

RPK 0.3 %

PLF 0.3 %-p


Cargo

ATK -3.1 %

RTK -0.7 %

OLF 1.7 %-p

Traffic revenue -3.6 %47%

38%

5%4%5%

Asia EuropeDomestic LeisureNorth-Atlantic

Passenger revenue split

*Passenger revenue.**Atlantic Joint Business revenue contribution included.


Agreements reached with crew

• Finnair and the Finnish Airline Pilots’ Association (SLL) reached an agreement bringing 17 million euros in permanent annual savings. – In return, protection against redundancies for

the next two years and an incentive plan.

• Finnair and the Finnish Cabin Crew Union (SLSY) reached a savings agreement that brings 18 million euros in permanent annual savings.– In return, Finnair protection against

redundancies for the next two years, protection from outsourcing, and a pension incentive.

• Savings impact gradually from 2015 onwards


Target 200 M€ permanent cost savings almost reached


Other

Pilots*

Cabin*

Technical & ground services

49

17

18

7

Phase I:140 M€

Phase II: 60 M€

Realised Remaining target

Total target200M€

4

Other employee groupsand other savings 9

Phase I additional + Phase II realised savings

Savings reachedby 30 September

2014 189 M€

8

1

140

*Agreements on savings made, not yet realised

Progress in cost savings did not offset decline in revenues• Turnover 622.7 M€, -2.2% y-o-y

– Weak home market demand– Currency effects

• Operational result 26.7 M€, -37.8% y-o-y

• RASK -1.6%– Excl. Fx, -0.4%

• CASK ex. fuel -0.4%. – CASK –1.3%.

6

Operational result, M€

-50-40-30-20-10

0102030405060

Q1/

10Q

2/10

Q3/

10Q

4/10

Q1/

11Q

2/11

Q3/

11Q

4/11

Q1/

12Q

2/12

Q3/

12Q

4/12

Q1/

13Q

2/13

Q3/

13Q

4/13

Q1/

14Q

2/14

Q3/

14Q

4/14

* 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.


Focus on pursuing additional revenue with A350s and product upgrades

Signature meals and newbuy onboard menu, Sky

Bistro

Lounge renewals New In-flightentertainment system

Full flat seats

7

Wireless on-board Airbus 350 XWBNew Economy Comfort package


Outlook* for 2014 unchanged

Finnair estimates:

• Its turnover in 2014 to be significantly lower than in 2013.

• Fuel costs are expected to remain high.

• Due to delays in the personnel cost reduction negotiations and the decline in unit revenue, 2014 operational result will show a significant loss.

*The full outlook can be found from interim report 1 January – 30 June 2014



Financials

Key figures Q3 2014 Q3 2013 Change%

Q1-Q3 2014

Q1-Q3 2013

Change %

2013

Turnover and resultTurnover, EUR million 622.7 636.9 -2.2 1,731.8 1,839.8 -5.9 2,400.3Operational result, EBIT, EUR million * 26.7 43.0 -37.8 -27.1 33.0 -182.2 11.9Operational result, % of turnover 4.3 6.8 -2,5 %-p -1.6 1.8 -3,4 %-p 0.5Operating result, EBIT, EUR million 23.6 39.8 -40.7 -31.1 15.8 <-200 % 7.9Operational EBITDAR, EUR million 80.1 91.4 -12.3 133.1 182.1 -26.9 210.1Result before taxes, EUR million 21.2 35.9 -40.9 -43.7 40.0 <-200 % 26.8Net result, EUR million 16.6 27.0 -38.3 -35.4 29.4 <-200 % 22.9Balance sheet and cash flowGross investment, EUR million 15.3 12.6 21.6 68.4 50.7 34.8 77.3Net cash flow from operating activities, EUR million -8.9 38.7 -122.9 39.8 128.4 -69.0 142.4ShareShare price at the end of quarter, EUR 2.50 3.12 2.77Earnings per share from the result of the period, EUR ** 0.13 0.21 -38.4 -0.28 0.23 <-200 % 0.18Earnings per share, EUR 0.11 0.19 -39.8 -0.33 0.16 <-200 % 0.11


Key figures

* * Before Hybrid Bond interest

Operational result, M€, Q3 2013 vs. Q3 2014


43.0

26.7

0.9

-7.8

-5.8

0.3 -1.10.3

7.9

-8.4

-0.8-2.5

0.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Revenue, M€, Q3 2013 vs. Q3 2014


0.4 0.3

-6.1

-16.0

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

Other revenue Cargo revenue Travel Services Traffic revenue TOTAL DEV.

-8.4

-13.8

Segment results: Airline Business*

Key figures 7–92014

7–92013

Change %

1–9 2014

1–9 2013

Change % 2013

Turnover, EUR million596.2 609.5 -2.2 1,645.7 1,745.0 -5.7 2,271.9

Operational result, EUR million 25.9 43.1 -39.9 -29.3 30.7 -195.5 8.8Average number of employees 4,400 4,883 -9.9 4,834


73 %

14 %

10 % 3 %

Airline Business turnover 596.2 M€

Scheduled traffic OtherCargo Charter traffic

Scheduled traffic development in Q3• Capacity decreased in all traffic categories except Europe.• Passenger unit revenues decreased in all traffic areas, mainly due to currency

effects.

* Includes from 1 Jan 2014 onward aircraft maintenance, Finnair Travel Retail Oy and Finnair’sproperty holdings and the management of properties related to the company’s operational activities.

Airline business: Q3 RASK & CASK development

-1.6 %

-1.3 %

-0.4 %

-3.1 %

3.8 %

-7.9 %

1.0 %-3.8 %

9.5 %

-2.2 %0.5 %

-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

RASK, unit revenue

CASK, unit cost

CASK, excl. Fuel

Fuel cost

Staff cost

Depreciation & lease costs

Traffic charges

Maintenance

Ground handling

Catering

Other expenses

Change, %


• Unit cost excluding fuel (CASK. excl. fuel) -0.4%• Unit revenue (RASK) at constant currency -0.4%

Segment result: Travel Services


• The weakness of the Finnish economy was reflected in home market demand, in both business travel and leisure traffic.

• Consumers’ uncertainty was reflected in the demand for leisure travel

Key figures 7–92014

7–92013

Change %

1–9 2014

1–9 2013

Change % 2013

Turnover, EUR million44.4 50.1 -11.3 161.2 183.2 -12.0 251.7

Operational result, EUR million 0.8 -0.1 >200 2.2 2.3 -2.9 3.1Average number of employees 669 761 -12.1 751

Operating costs 600 M€ Fuel largest cost item


Change, %

9.8 %

-10.9 %

52.4 %-4.6 %

-1.1 %

-6.5 %

6.4 %

1.8 %

-0.9 %

1.0 %

-4.3 %

0.4 %

-20% 0% 20% 40% 60%

Other costs

Sales and Marketing

Leasing

Tour operators

Maintenance

Depreciation

Other rental payments

Traffic charges

Ground handling and catering

Staff costs

Fuel

Total

30%

14%

11%

10%

9%

7%

5%

5%

4% 3% 3%

Fuel Staff costsGround handling and catering Traffic chargesOther costs Other rental paymentsDepreciation MaintenanceLeasing Tour operationsSales and marketing

Fuel, spot-price development


58 %

10 %

6 %

5 %

4 %

18 %

EUR YEN CNY SEK USD Other

49%

12%

10%

4%

4%

21%

EUR JPY CNY USD SEK Other currencies

Revenue currency split

Revenue currencies Q3 2014


Revenue currencies 2013

Airbus fleetThe first four A350s arrive in H2 2015

19

9 AIRBUS A319 11 AIRBUS A321

8 AIRBUS A3307 AIRBUS A340

10 AIRBUS A320


H2 2015 onwards: AIRBUS A350 XWB• First four by the end of 2015• Next 7 firm orders by the end of 2017

Strong financial position supports business development and future investments

-20

0

20

40

60

80

100

120

2010 2011 2012 2013 Q3 2014

Strong balance sheet

Equity ratioGearingAdjusted gearing

%


-150

0

150

300

450

600

2010 2011 2012 2013 Q1-Q32014

Good cash position

Net cash flow from operationsInvestments, grossShort term cash and cash equivalents

M€

Fuel cost build up


• Q3/13 hedging loss 2,6 M€

• Q3/14 hedging loss 1,7 M€

Comparable Q3 fuel cost, M€

186 177

0.5%-4.5% 0.0% -0.5%

1 -1-8 0

0

20

40

60

80

100

120

140

160

180

200

Q3/2013 Volume Price Currency Hedgingdeviation

Q3/2014

Rolling hedging policy


Hedging positions as of 30 September 2014Hedging ratio 2014: 75%

• Finnair hedges jet fuel consumption 24 months ahead within the limits defined in the hedging policy.

• Finnair’s fuel purchases are 72% hedged for the H1 and 50% for the H2 of 2015.

• 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.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

hedge ratio

upper

lower

Thank you


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