Finnair Q1 Result 2012 · PDF fileFinnair - Q1 result 27 April 2012. Q1 Main events Market environment Strategy implementation Structural reform • The structural reform and intense

FinnairQ1 Result 2012

27 April 2012Mika Vehviläinen

Content

• Main events of Q1 2012• Business performance in

Q1 2012• Structural reform and

cost savings programme• Outlook

• Figures

Turbulent competitive landscape in Europe

• Numerous market exits by competitors: – Bankruptcies and structural reforms

• Legacy carriers restructuring their loss-making short hauloperations

• Low cost carriers gaining market share

Finnair - Q1 result 27 April 2012

Q1 Main eventsMarket environment Strategy implementation Structural reform• The structural reform and

intense competition in the industry are visible in the competitive landscape:major cost savings, structural reform programmes, bankruptcies

• Conservative capacity growth in Europe, numerous market exits

• Passenger demand ahead of expectations, cargo demandremains stable

• Price of oil remains high, fuel cost up by 26.2%

Asia• Chongqing preparations• Asian corporate sales growth

over 14 %

Partnership strategy• Letters of intent in Catering and

Technical services• Continued search for solutions

to cost challenges in short haultraffic

Smooth travel experience• Customer satisfaction

continued to improve, among the best network carriers

Cost efficiency improved: • Unit cost excl. fuel (CASK)

down by 6.1% in 2011

• Target of 140 M€ annual savings by 2014

• Structural reform and cost savings program proceeds as planned and on track:

• target 70 M€ of realisedsavings during 2012

• To improve cost efficiency Finnair will focus on core business and continues to build a stronger partnershipnetwork around its business


Business performancein Q1 2012

Turnover

Turnover, mill. Eur2 257,7 Turnover growth*

+ 10,9% in January-March 2012

Asian passanger traffic revenue* +16% in January-March 2012

* Change year-on-year

Finnair - Q1 result 27 April 2012 6

533,7 591,8

539,4

607,2

577,4

0

500

1 000

1 500

2 000

2 500

2011 2012

Q1 Q2 Q3 Q4

Operating costsOperating costs, M€+7% in January-March 2012

Fuel costs, M€ **+26.2% in January-March 2012

132.8 167.6

131.7

144.3

146.4

0

100

200

300

400

500

600

2011 2012

Q1 Q2 Q3 Q4

** Hedging included

580.8 621.7

557.2

584.2

613.40

0

500

1 000

1 500

2 000

2 500

2011 2012

Q1 Q2 Q3 Q4

* Change year-on-year

2,335.6 555.2

7Finnair - Q1 result 27 April 2012

Cost Structure

18%

27%

3%5%7%9%

8%

6%3%

5%9%

Q1 2012

20%

23%

3%5%5%9%

8%

7%

4%5%

11%

Q1 2011


Airline Business: RASK & CASK developmentQ1 2012

8.7%

2.0%

-4.7%

20.3%

1.4%

0.6%

-2.1%

-8.5%

-3.3%

-13.3%

RASK, unit revenue

CASK, unit cost

CASK, excl. Fuel

Fuel cost

Staff cost

Traffic charges

Ground handling & catering

Maintenance

Depreciation & lease expenses

Other expenses


Wider range of new, affordable fares

• Finnair sold 435,000 lowest price category flights during Q1, which is more than the combined offering of the closest competitors fromHelsinki during the same period

• New affordable prices in domestic and Scandinavien routes havebeen well received, several successful campaigns

• Internet sales grew, especially in Finland

10

Cargo and Travel services had anegative effect on the result• Overall market demand for cargo has remained flat for the last two

years while passenger traffic gas grown significantly.• Cargo profitability was negatively affected by high fuel costs.

• The package tour market continued to have overcapacity. Production was adjusted from the previous year. However, the demand picked up markedly when compared to the end of the year 2011.

• The result of the Travel Services segment was affected negatively by non-recurring items.

11

Traffic performance• Available Seat Kilometers (ASK) grew in moderation mainly as a result of growth in

Asian traffic• Revenue Passenger Kilometers (RPK) grew significantly• Passenger Load Factor (PLF) improved significantly • Passenger revenues increased• Tsunami in Japan and the Arabic spring had an effect on 2011 performance in Q1

Q1 /2012 vs. Q1/2011ASK +3.9%- Asian share of ASK:s 47%RPK +9.1%PLF % +3.6%-pPassenger revenues +13%


Traffic structure Q1 2012

47%

26%

5%

4%

18%

ASK

Asia Europe Domestic

North America Leisure

41%

32%

9%

3%

15%

Passenger revenues

Asia Europe Domestic

North America Leisure


Transformation and cost saving programme

The Future FinnairCost competitiveness

140 M€ permanent reduction in cost level

Service excellenceFinnair designed for you

Partnership strategyPartner network and

alliances

Profitable growthStrengthening Asian

presence, business travel and tailored ancillary

services

Focus on core businessStructural solutions and

ongoing business improvement

Number 1 in the Nordic countries

Among the top three in Asian traffic

Doubling of Asian turnoverby 2020


Significant steps in implementing partnership strategy• Letter of Intent on the sale of Catering operations to LSG Sky Chefs

• Letter of Intent on sourcing engine and component services for Finnair’s aircraft from SR Technics, daily line maintenance continues to be part of Finnair’s operations

• Partnering agreements are an integral part of getting Finnair’soperations profitable

16

Targeting 80 M€ savings by end of 2012

Administration, marketing and

salesMaintenanceInflight and

support services Fleet and network Productivity of flying personnel

10M€ 70 M€

2011 2012

60 M€

201317

We have two targets

1. Growth in Asia and in the Nordiccountries

2. Improve competitiveness of our European traffic


Outlook

Outlook for 2012

• Operational result in the first half of 2012 is estimated to be clearly loss-making. The operational result for the second half of the year, which is traditionally stronger due to seasonal variations, is estimated to reflect improved profitability compared to the first half of the year.

• Passenger traffic capacity in its current structure and form is estimated to grow by around 5% in 2012.

• Fuel costs are estimated to be significantly higher in 2012 compared to the previous year.

• Costs reductions of 80 M€ out of the total of 140 M€ are estimated to be achieved by the end of 2012.


Q1 2012 figures

Key figuresJan-Mar

2012Jan-Mar

2011Change

%2011

Turnover and resultTurnover € million 591.8 533.7 10.9 2,257.7Operational result, EBIT € million -25.0 -43.1 42.0 -60.9Operational result, % turnover % -4.2 -8.1 3.9%-p -2.7Operating result, EBIT € million -20.2 -43.1 53.1 -87.8EBITDAR € million 24.9 3.6 - 139.6Result before taxes € million -26.2 -46.2 43.3 -111.5Net result € million -20.4 -33.8 39.6 -87.5Balance sheet and cash flowEquity ratio % 31.0 34.7 3.9%-p 32.6Gearing % 44.4 30.0 14.4%-p 43.3Adjusted gearing % 111.8 80.6 31.2%-p 108.4Capital expenditure, CAPEX € million 7.4 30.9 -76.1 203.9Return on capital employed, ROCE 12 months rolling % -4.07 -1.5 - -5.2Return on equity, ROE , 12 months rolling % -9.32 -4.2 - -10.9Net cash flow from operating activities € million -7.9 -33.9 76.7 50.8ShareShare price at end of quarter € 2.30 3.84 -40.1 2.30Earnings per share € -0.18 -0.28 35.7 -0.75


Operational EBIT build-up in Q1 2012 (IFRS)

-43.1

-25.0-34.9

9.52.3 1.9 -1.8 -3.2

-4.4

-34.9

43.5

12.1

3.3

-10.3

-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Q1 2011 EBIT

Traffic revenue

Other revenue

Other expenses

Cargo revenue

Expenses for

tour operators

Staff costs

Other rents

Traffic charges

Groundhandling

andcatering

expenses

Maintenance Fuel Q1 2012 EBIT

* Operational EBIT


Change in operating costs Q1 2012

-13.6%

6.9%

-5.7%

10.1%

6.1%

-1.6%

26.2%

1.4%

7.0%

Other expenses

Depreciation and lease payment for aircraft

Expenses for tour operations

Ground handling and catering expenses

Traffic charges

Staff costs

Fuel

Operating expenses excl. Fuel

Total operating expenses


Jet fuel, spot price development


Fuel cost development Q1 2012 vs. Q1 2011

26

*Incl. Hedging profit of 17 Mill. EUR

133

168*

9

237 -5

0

50

100

150

200

Q1/2011 Volume Price Currency HedgingDeviation

Q1/2012

Mill. EUR


Hedging positions 31 March 2012

0%

20%

40%

60%

80%

100%hedge ratioupperlower


Traffic Performance Q1/2012 vs. Q1/2011

• Asia traffic share 47 % of total ASK

28

ASK -10.7% ASK 5.7% ASK 8.3%RPK -5.4% RPK 22.2% RPK 11.5%PLF% 4.4%-p PLF% 9.4%-p PLF% 2.2%-pTraffic revenue * -6.4% Traffic revenue * 18.5% Traffic revenue * 16.5%

ASK -2.6% ASK -5.6% ASK 3.9%RPK -5.5% RPK 13.0% RPK 9.1%PLF% -2.7%-p PLF% 10.6%-p PLF% 3.6%-pTraffic revenue * 1.6% Traffic revenue * -6.1% Traffic revenue * 11.4%

ATK 11.0%RTK 24.6%CLF% 7.8%-p

* passenger revenue

Traffic revenue 21.7%

Cargo

Europe North Atlantic

Leisure traffic Domestic

Asia

Total


Thank you!

Documents

Finnair Q1 Result 2012 · PDF fileFinnair - Q1 result 27 April 2012. Q1 Main events Market environment Strategy implementation Structural reform • The structural reform and intense