FINNAIR CAPITAL MARKETS DAY · Opportunity to improve our productivity 11 Finnair Capital Markets Day 2019 OPEX has increased faster than revenues * IFRS16 Adjusted ** Last 12 months

12 NOVEMBER 2019

FINNAIR CAPITAL MARKETS DAY

Agenda

Finnair Capital Markets Day 20192

Finnair strategy update – CEO Topi Manner

Network and fleet – CCO Ole Orvér

Break

Operational excellence – COO Jaakko Schildt

Modern Premium Airline – SVP Customer Experience

Piia Karhu and CCO Ole Orvér

Break

Creating value for shareholders – CFO Mika Stirkkinen

Closing words – CEO Topi Manner

Cocktails and networking

Disclaimer


By attending Finnair Capital Markets Day 2019 or by reading this presentation, you acknowledge and agree that the information provided

orally or in this presentation (i) is provided in summary form; (ii) is not intended to contain all the information that is or may be material to investors or potential investors;

(iii) may be amended and supplemented as Finnair sees fit; (iv) may not be relied upon for the purpose of entering into any transaction and should not be construed as,

nor be relied on in connection with, any offer, invitation or recommendation to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any securities

of Finnair. Any investor or prospective investor considering the purchase, disposal or holding of any securities of Finnair should consult with its own counsel and advisers

as to all legal, tax, regulatory, financial and related aspect thereof.

This presentation contains forward‐looking statements. These statements may include the words “believe”, “expect”, “anticipate”, “foresee”, “intend”, “plan”, “estimate”,

“focus”, “continue”, “will”, “may”, “targeting” and similar expressions as well as statements other than statements of historical facts including, without limitation, those

regarding the financial position, business strategy, development plans, objectives and targets of Finnair. Such forward‐looking statements involve known and unknown

risks, uncertainties and other important factors which may affect Finnair’s ability to implement and achieve the economic and monetary policies, budgetary plans, fiscal

guidelines and other development benchmarks set out in such forward‐looking statements. Risks related to Finnair’s operations are discussed in the company’s financial

disclosures and on the company’s website at https://investors.finnair.com/en/governance/risk-management. Actual results, performance or achievements may be

materially different from future results, performance or achievements expressed or implied by the forward‐looking statements. Such forward‐looking statements are based

on numerous assumptions regarding Finnair’s present and future policies and plans and the environment in which Finnair will operate in the future. Furthermore, certain

forward‐looking statements are based on assumptions or future events which may not prove to be accurate, and no reliance whatsoever should be placed on any forward-

looking statements in this presentation. The forward‐looking statements in this presentation speak only as of the date of this presentation, and Finnair expressly disclaims

to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward‐looking statements contained herein to reflect

any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Nothing in the foregoing is

intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. The information in this presentation has not been independently verified.

No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the presentation and the information contained herein.

Information in this presentation has been obtained from various sources and Finnair does not guarantee the accuracy or completeness of such information. All projections,

valuations and statistical analyses are provided for information purposes only and should not be relied upon as an accurate prediction of future performance.

https://investors.finnair.com/en/governance/risk-management

FINNAIRSTRATEGY UPDATETopi Manner, CEOCapital Markets Day 2019

New phase: sustainable, profitable growth


• Potential to capture

economies of scale

• One of the most modern

long-haul fleets

• Stronger brand and

customer experience

• Improved digital

capabilities

• Modernised culture

Disruption

Restructuring

Renewal

2008–2010

2011–2014

2015–2017

2018

Accelerated

growth

Sustainable, profitable growth


We have unique strengths and are winning market share

Successful strategy leveraging unique geographical location

Unrivalled local network and attractive market for incoming tourism

Strong operational performance and safety valued by our customers

High customer satisfaction and people experience

Solid financial situation with healthy balance sheet

Delivery on targets


We have achieved our previous targets on growth - need to improve profitability

* IFRS16 Adjusted

** Last 12 months (2018 Q4–2019 Q3)

Source: Finnair 2018 Annual report, Finnair restatements 2018, Finnair Interim report for 1 January–30 September 2019

2016

-1.6%

2014

5.2%

2015 2018*

2.4%

2017 LTM**

1.0%

6.6%7.7%

24

171220

282

504 513

2018*2014 LTM**2015 2016 2017

EBIT Margin EBIT

Net operating cash flow

Strong growth in EBIT and cash flow

mEur

Gearing well below 175%

ROCE at 12.7% average last two years > 7%

ASK Asia more than double

20 million passengers by 2030 ahead (13.3

2018)

OP profit 6% (average 6.3% last two years)

Roadmap to sustainable, profitable growth


Growth in line with market growth

Strengthened customer offer

Increased efficiency

Improved market position in Asia

We leverage our strong hub and focus on the most profitable Asian cities


Long history,

strong partnerships

* Boeing commercial market outlook

** Market share on our relevant market

Most environmentally

sound

EU – Asia estimated growth

> 4% CAGR*

Strengthening position

> 6%**

Shortest route

24hr rotation

Focused strategy

We focus on the core; growth through transfer


Integrated business One culture

50%

30%

6%

7%

7%

Transfer Passengers

Local Passengers

Ancillaries

Travel Services

Cargo

COMMITMENT TO CARE

COURAGE

SIMPLICITY

Revenue

share

Source: Finnair Interim report for 1 January–30 September 2019 and Finnair Internal data

Opportunity to improve our productivity


OPEX has

increased

faster than

revenues

* IFRS16 Adjusted

** Last 12 months (2018 Q4 – 2019 Q3)


OPEX ex Fuel CAGR

6.1%

ASKs CAGR

8%

Revenue CAGR

5.5%

2014 2015 2016 2018*2017 LTM**

OPEX ex fuelASK Fuel Revenue

+8%

+6.1%

ASK growth vs RASK development

More stable RASK development moving forward as growth moderates

Growth in ancillary revenues per passenger


There are also opportunities to improve our revenues

We are taking a step-change in retailing to improve on revenues

7.4 7.08 6.83 6.96 6.72 6.55

2016 LTM**2014 2015 2017 2018*

ASK RASK

8.22 €

10.02 €

11.55 €12.15 € 12.11 € 11.95 €

2014 2015 2018*2016 2017 LTM**

Ancillary Revenues per passenger

Cents (€) €

- 2.4%

CAGR

* IFRS16 Adjusted

** Last 12 months (2018 Q4 – 2019 Q3)


+8.3%

+7.8%

Fleet investments to boost efficiency and reduce carbon footprint


* Estimated investments including already announced commitments

3.5 – 4 billion

euros*

Replacement /

Renewal2/3

Growth1/3

• Modern Premium Experience

• Carbon footprint

• Fuel efficiency

• Cost savings

• Enabling growth

Investments predominantly funded through cash flow

Sustainability is a natural part of everything we do


We want to be

a frontrunner in

sustainability

BiofuelBiofuel flights since 2011

1/2Single-use plastics (end 2022)

0Zero landfill waste at HEL

Our detailed sustainability plan to

be published in early 2020

27%CO2/RTK since 2005

Long-term roadmap for carbon reduction


Fleet investments to reduce carbon

footprint and boost efficiency

Sustainable aviation fuels

(Bio and Synthetic)

IntermodalityOperational improvements

Emissions trading

Voluntary and non-voluntary

offsetting (including CORSIA)

Our refined strategy and ambitious new targets


Continued growthIn line with market growth

Strengthened customer offerLeading to stabilised unit revenue

Increased efficiencyLeading to continually decreasing unit cost


* Over the cycle (at constant fuel and f/x), 12–18 month build-up period

• Comparable EBIT > 7.5%*

• Return on Capital Employed (ROCE) > 10%*

• On-time performance (OTP) > 85%

• NPS positive development

• eNPS positive development

We have a new leadership team to drive the next stage of our journey… many of whom you’ll meet here today


Topi MannerChief Executive Officer

Piia KarhuSVP Customer Experience

Ole OrvérChief Commercial Officer

Jaakko SchildtSVP Operations

Tomi PienimäkiChief Digital Officer

Nicklas IlebrandSVP Strategy

Johanna KarppiSVP People & Culture

Arja SuominenSVP Communications and

Corporate Responsibility

Sami SareliusSVP and General Counsel

Mika StirkkinenChief Financial Officer

Best customer

experience in

Finland

(Aurinkomatkat)

Customers and employees make it happen


People are proud

to work at Finnair

2,000New employees in the

past 2 years

Best Airline in

Northern Europe

Best European

Airline

Most attractive

employer NPS

38

4.25*

* 2018 WeTogether survey (1–5 scale)

NETWORK AND FLEETOle Orvér, CCOCapital Markets Day 2019

Strong network leveraging Helsinki’s geographical position connecting Europe with Asia


21destinations

Over

100destinations

8destinations • 14.3 million passengers in the

last 12 months*

• More than 20,000 origin-

destination city pairs in our

network

* Source: Finnair Interim report for 1 January–30 September 2019

Transfer traffic between Europe and Asia is an essential part of our business


* Traffic splits by flown ticket revenue rolling 12 months (Q4/2018–Q3/2019)

62%

38%

2/3 of flown ticket revenue from transfer traffic

73%

14%

10%3%

0%

3/4 of transfer traffic comes from Asia

Asian

Intra European

Atlantic

Oceanic

Other

Transfer

Local

Growth in line with market


Finnair growth, ASK billion

Source: Finnair 2018 Annual report, Finnair Interim report for 1 January–30 September 2019, SRS

31 32

47

20192014 2015

+3.1%

CAGR

+10.5%

CAGR

3–5% p.a next

3 years

PKX

CTS

HND

PUS

Our growth is targeted towards Asia with a combination of new destinations and additional frequencies


New in 2019 New in 2020

• Daxing - Beijing November 2019

• Sapporo December 2019

• Busan March 2020

• Haneda - Tokyo March 2020

• Over 100 weekly frequencies to destinations

in Asia in summer 2020

Continuously strengthening our network

with new destinations in Asia

SJB – 25% market share Europe Japan

AJB – 20% market share Europe USA

Leveraging strong partnerships to improve network scale and reach


Strategic Joint Businesses*

Norra – operations partner for regional flying

Strategic partnerships

* Source: Year ending Jul 19, DDS O&D + est pax

We continue to

operate as an

independent

airline

leveraging on

our strong

partnerships

Cargo is an integrated part of our business


The A350 is an

extremely efficient

cargo aircraft

Finnair has the most

modern air cargo

terminal in Europe

Digital integration

enabling efficient

operations and high-

quality delivery

Strengthening our

position in special

products and

services to improve

yields

More efficient use of Helsinki hub and assets through four bank structure


Image by Arkkitehtitoimisto ALA Oy / Arkkitehtitoimisto HKP Oy

Growth outside main bank – illustrativeNumber of flights (Arrivals and Departures)

5:00–10:00 10:00–14:00 15:00–19:00

(main bank)

19:00–01:00

Current Future

Fleet growing, with better utilisationof narrow-body aircraft


12

12

37

22

Narrow-body

Wide-body

20252019

Approx. 70

Approx. 30

Turboprop

Other regional

83

Approx. 100

Narrow-body / Wide-body ratio 2.8 : 1 ~2.3 : 1

Fleet age in line with peers – narrow-body fleet to be renewed


11.8

11.7

11.6

10.7

10.2

0.0 5.0 10.0 15.0

Air France-KLM

Lufthansa

IAG

SAS

Finnair

Source: Cirium fleets database

Average fleet age vs peer European network carriers

Wide-body

average age of

5.2 years –

significant fuel

and CO2

benefitsNarrow-body

renewal to be

initiated within

the strategy

period

Summary

• Well-positioned network and Europe –

Asia strategy

• Continued growth – in line with market,

3–5%

• Further improved utilisation of core

assets

• Fleet investments for growth,

operational efficiency and sustainability


OPERATIONALEXCELLENCEJaakko Schildt, COOCapital Markets Day 2019

Best customer

experience in Finland

(Aurinkomatkat)

Best Airline in

Northern Europe

Best European

Airline

Most attractive

employer

Operational quality and safety culture are Finnair’s strengths

31

• Finnair has an excellent safety record

• Our punctuality and regularity are on-par

with peers

• Our customer satisfaction is high with an

NPS of 38*

* Q3 2019 figure.

4.25*People are proud to work at Finnair

* 2018 WeTogether survey (1–5 scale)


Key initiatives to improve our unit cost performance

32

On-time

performance

Weight and fuel

Automation and

efficiency

* IFRS16 Adjusted

** Last 12 months (2018 Q4 – 2019 Q3)


Finnair costs have grown faster than revenues

OPEX ex Fuel CAGR

6.1%

ASKs CAGR

8%

Revenue CAGR

5.5%

2014 2015 2016 2018*2017 LTM**

OPEX ex fuelASK Fuel Revenue

+8%

+6.1%


On-time performance improvement offers great potential


• On-time performance contributes

to improved productivity, cost

savings and customer satisfaction

• Key initiatives to improve

• Planning

• Execution

• Predictability

69%75% 75% 78%

83% 85%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

85.0%

FinnairLufthansa IberiaNorwegian SAS KLM

Share of on-time arrivals (≤15 min delay)

from OAG, 2018

Note: Flights are considered on-time if actual departure is within 15 min of scheduled departure.

Source: OAG, Finnair internal data

Target


Weight and fuel efficiency are key drivers for unit cost improvement and sustainable operations

Planning and forecasting

Flight optimisation

Aircraft maintenance

Airport operations

Data analytics improves operational excellence

Existing decision model

• Static history average flight data

• Av100+ data points

• Human decision-making

Improved customer

experience and financial

performance

Planned decision model

• Real-time passenger flow

flight data

• 1,000,000+ data points

• AI based decision-making

35 Finnair Capital Markets Day 2019

We will drive our unit costs down

20162015

7.01

2014 2017 LTM**2018*

6.53 6.67 6.496.21 6.21

ASK Fuel CASK ex Fuel

Continually

decreasing

unit cost

+8%

* IFRS16 Adjusted

** Last 12 months (2018 Q4 – 2019 Q3)



MODERN PREMIUM AIRLINEPiia Karhu, SVP Customer ExperienceCapital Markets Day 2019

Ole Orvér, CCO

Taking the company to a new level

MODERN PREMIUM AIRLINE

We offer more choice and ease to customers

CHOICE

EASE

VALUE

PERSONALISED

38NPS


Introduction of Premium Economy to capture demand from both new and existing customers

40 Finnair Capital Markets Day 2019

Premium Economy Economy class

• Economy that allows

customers to choose

how to travel

• Elevated economy experience with more onboard space and upgraded dining

Business class

• Extreme comfort, full-flat

seats and

top-class service

New fare brands to offer more choice and drive upsell


Premium Economy

A

BC

Business

AB

C

Economy

AB

C

42

Comprehensive product portfolio allowing customers to choose how they want to travel

Food, beverages & lounge

Wi-Fi & entertainment

Extra baggage Travel retail

Destination extras


Aurinkomatkatholiday packages

Finnair Holidays

Seats & upgrades

Optimised pricing to maximise conversion and value

43

Origin – destination revenue

management set-up

Advanced analytics

Dynamic pricing

Ancillary optimiser


OPTIMISED

PRICING

Total renewal of sales and

distribution capabilities

Better sales to more customers

44

• Better product information display

• Improved sales management and

personalisation

• Distribution costs optimisation

• Ability to distribute via new marketplaces


Finnair marketplaces have been renewed and enable better selling

45

*June 2019

** Comparison is done month on month in new Finnair.com in open markets.

*** Average increase in selected PoC markets


68 NPS* in mobile app

New mobile app New Finnair.com

+20%**increase in average

order value

+35%*** increase in

conversion rate

Value comes from more customers, stabilised unit revenue and optimal distribution spend


MORE PRODUCTS BETTER PRICING BETTER SALES BIGGER NETWORK

2015 ..2016 2017 2018 2019 ..

RASK development Illustrative

ASK growth

CREATING VALUE FOR SHAREHOLDERSMika Stirkkinen, CFOCapital Markets Day 2019

Cash / Sales

Source: Company filings. Data are averages as of last available company

filings.

Note: Cash / Sales = Cash and cash equivalents / LTM Revenue

European LCCs include Ryanair, easyJet and Norwegian; European full-

service carriers include Air France-KLM, IAG, Lufthansa, SAS and Turkish

Airlines. Norwegian figures adjusted for convertible bond and equity

offering.

Net Debt / EBITDA


Finnair’s strong capital structure supports growth


filings.

Note: EBITDA = LTM EBITDA. For SAS, EBITDAR used instead of

EBITDA for comparability and adjusted for hybrid offering. Norwegian

figures adjusted for convertible bond and equity offering.

34%

30%

18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Finnair European low-costairlines

European full-serviceairlines

3.47

2.57

1.44

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

European low-costairlines


Finnair

257% 255%

74%

0%

50%

100%

150%

200%

250%

300%

European low-costairlines


Finnair

Gearing


filings.

Note: Gearing = Net Debt / Equity before minority interest. Net Debt = Total

interest-bearing debt – Cash and cash equivalents. For SAS, capitalized (7

x lease payments) operating leases are added to total debt to ensure

comparability; adjusted for hybrid offering. Norwegian figures adjusted for

convertible bond and equity offering. Total interest-bearing debt does not

include unfunded pension obligations due to data availability.

Investments support sustainability and efficiency


Future planned investments until

2025 are estimated to be

3.5–4.0 Bn€ 850 M€ are current commitments

2/3 of the investments are

replacement and

1/3 growth

The investments drive

better cash flow and

dividend payout in the

future

The investments will

result in less CO2

emissions and support

fuel efficiency

Cash flow has been strong

Strong operating cash flow can be utilised when making

future investments and majority will be financed with cash.

Dividend policy remains stable


Strong cash flow enables investments, dividend policy remains intact

Finnair pays on average at least 1/3 of the EPS as dividend

during an economic cycle. Earnings trend and outlook,

financial situation and capital needs are, however, taken

into consideration.

0

100

200

300

400

500

600

2015 2016 2017 2018 2018* LTM**

Net operating cash flow

171

220

282

383

504513

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2015 2016 2017 2018

Earnings per share Dividend

0.570.55

1.23

1.08

0.10

0.30 0.27

mEUR EUR

* IFRS16 adjusted

** Last 12 months (2018 Q4 – 2019 Q3)

Source: Finnair 2018 Annual report, Finnair restatements 2018, Finnair Interim report for 1 January - 30 September 2019

Cash to sales

Finnair is currently well above the minimum ratio

Gearing


Target more efficient, cycle-proof balance sheet

Gearing ratio is on a healthy level

0%

10%

20%

30%

40%

Q3 2019 Minimum

Cash to sales ratio

0%

50%

100%

150%

200%

Q3 2019 Maximum

Gearing ratio

Source: Finnair Interim report for 1 January - 30 September 2019

Hybrid capital

The goal is to lower the hybrid capital in the future

Share of owned aircraft


Target more efficient, cycle-proof balance sheet

Strong cash position allows to increase the share of

owned aircraft ratio

0

50

100

150

200

Q3 2019 Future

Hybrid capital

0%

50%

100%

Q3 2019 Future

Share of owned aircraft

mEUR

Source: Finnair Interim report for 1 January - 30 September 2019


Long-term strategic targets

Sustainability

Strategic metric

Comparable EBIT margin

ROCE

Net promoter scope (NPS)

On-time performance (OTP)

Employee NPS

Profitability

Customer satisfaction

Employee satisfaction

Target

Comparable EBIT: > 7.5%*

NPS: increasing (currently 38)

OTP: 85% (up from 78% in 2018)

eNPS: Increasing (currently 19)

ROCE: > 10%*

To be decided during Q1 2020


• Passenger traffic

• Ancillaries

• Cargo

• Travel Services

54

Focused strategy, integrated business and one culture driving profitability

Network & fleet

Modern premium airline

Operational excellence

One culture & ways of working

Sustainability


Shareholder value with profitability and efficient balance sheet


Shareholder

value

Balance sheet efficiency

Balanced ASK growth

of 3–5% CAGR

Comparable EBIT > 7.5%*

Modern Premium Airline = Stable

RASK

Operational Excellence =

Decreasing CASK

ROCE > 10%*


CLOSING REMARKSTopi Manner, CEOCapital Markets Day 2019

• From accelerated to sustainable profitable growth, focusing

on connecting Europe with Asian megacities

• Continuous efficiency focus to capture economies of scale

• Driving growth in retailing revenue, stabilising unit revenue

• A frontrunner in sustainability to future-proof the business

• Continued focus on customer and people experience

• Fleet investments to boost efficiency and reduce carbon

footprint

• Strong cash flow generation used to finance investments

while keeping the dividend policy intact


Value creation for shareholders –sustainable, profitable growth

Culture & ways of working


Values

Commitment to care

Simplicity

Courage

Ways of workingLeadership principles

Organise for success

Work together

Transparency & follow up

Clear targets

Accountability

Agile

Lean

Base salary

Short-term incentives

Long-term incentives

FlyShare

Employee fund

Compensation model aligned with strategic targets


• Common strategic targets

• Unit performance

• Strategy financial targets (profitability,

unit revenue, unit cost)

Open to all employees –

promoting ownership of Finnair shares

Our compensation model Strategy Targets

Our refined strategy and ambitious new targets


Continued growthIn line with market growth

Strengthened customer offerLeading to stabilised unit revenue

Increased efficiencyLeading to continually decreasing unit cost



• Comparable EBIT > 7.5%*

• Return on Capital Employed (ROCE) > 10%*

• On-time performance (OTP) > 85%

• NPS positive development

• eNPS positive development

Documents

FINNAIR CAPITAL MARKETS DAY · Opportunity to improve our productivity 11 Finnair Capital Markets Day 2019 OPEX has increased faster than revenues * IFRS16 Adjusted ** Last 12 months