Q1 2015 EN Final - Finnair · Q1 2015 Result 7 May 2015 ... Turbulent market environment • The weakness of the Finnish economy continued to be reflected in the demand in the first

FinnairQ1 2015 Result

7 May 2015CEO Pekka Vauramo, Interim CFO Mika Stirkkinen

1 Finnair Q1 2015 Result, 7 May 2015

Turbulent market environment

• The weakness of the Finnish economy continued to be reflected in the demand in the first quarter, particularly in the package tour market.

• There were weak signs of a recovery in the demand for consumer and business travel.

• Appreciation of several income currencies supported unit revenue improvement in long haultraffic.

• The appreciation of the dollar diluted the benefit gained from the substantial decrease in the price of jet fuel.

• In cargo traffic, continued capacity growth between Asia and Europe put further downward pressure on yields.

• Finnair’s market share increased significantly in European traffic and fell slightly in Asian traffic.*

Finnair Q1 2015 Result, 7 May 20152

*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.

Revenue at last years level, OperationalEBIT improved

• Revenue flat y-o-y 540.4 M€– Passenger revenue grew– Revenue from Suntours and Cargo decreased– Loss of external revenue from sold operations

• Operational result-28.4 M€, +17%

• Airline business unit revenue at constantcurrency -0,4%

• Unit cost excluding fuel, at constant currency+1,1 %

3

Revenue and operational result, M€


* Operational result (EBIT), excluding non-recurring items and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves.

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

0

100

200

300

400

500

600

700

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

Q1/

15

Revenue Operational EBIT, %

Positive trend in passenger traffic revenue, revenue from Travel services decreases


0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

Q1 2014 Q1 2015

Passenger revenue Ancillary servicesCargo OtherTravel Services

543.3 M€ 540.4 M€

+5,8 %

-17,5 %-12 %

-17,7 %

+14 %

• Passenger traffic ticket revenue and ancillary sales grew y-o-y.

• Cargo revenue decreased, but profitability improved due to discontinuation of the cargo freighter flights to Asia.

• Other Group External revenue decreased after the sale of Travel Retail store operations and Finncatering businesses.

• Travel Services' revenue fell significantly due to decreased demand and subsequent adjustment of Suntours package tour supply.

Passenger revenue grew in line with capacity, discontinuation of cargo freighter flights to Asia visible in Cargo numbers

5

North America**

ASK 11.3 %

RPK 7.5 %

PLF -2.8 %-p

Revenue* 3.9 %

Europe

ASK 5.8 %

RPK 3.2 %

PLF -1.9 %-p

Revenue* 5.1 %

Total Traffic

ASK 3.1 %

RPK 2.3 %

PLF -0.6 %-p

Revenue* 3.1 %

Asia

ASK 1.1 %

RPK 1.2 %

PLF 0.1 %-p

Revenue* 1.4 %

Domestic

ASK -6.0 %

RPK -0.1 %

PLF 4.2 %-p

Revenue* 2.3 %

Cargo

ATK 3.3 %

RTK -14.6 %

OLF -11.1 %-p

Revenue -15.3 %43%

41%

10%6%

Asia Europe

Domestic North America Finnair Q1 2015 Result, 7 May 2015

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

Passenger revenue split

Flybe Nordic acquisition and ownership negotiations• On 31 March 2015, Flybe Nordic was transferred to Finnair’s ownership on an

interim basis.

• Following the acquisition, Finnair continued negotiations with Staffpoint and GWS regarding the future ownership of Flybe Nordic.

• Finnair expands its contract flying agreement with Flybe Finland from 1 May 2015 onwards to cover all routes operated by Flybe Finland at its own commercial risk from Helsinki.

• The change in ownership and the expansion of the contract flying agreement will not have a significant financial impact on Finnair in 2015.

• Flybe Finland Oy name will be changed to Nordic Regional Airlines.


Outlook for 2015

Finnair estimates that:

In 2015, its capacity measured in Available Seat Kilometres will grow by approximately 3 per cent and that its revenue will remain at the 2014 level.

Finnair estimates that its 2015 unit costs excluding fuel at constant currency will decrease from the 2014 level.

The lower price of jet fuel and the full impact from the completed savings program are supporting the financial performance of Finnair in 2015.

As a separate guidance and calculated using the exchange rates effective at the end of the review period, Finnair estimates that the non-recurring items associated with the long haul fleet renewal in 2015 will have a substantial positive impact on Finnair’s operating result due to the strengthened US dollar.

*The full outlook can be found from Financial Statements Bulletin 2014Finnair Q1 2015 Result, 7 May 20157


Strategy

9

Vision:

Unique Nordic Experience

Mission:

Finnair offers the smoothest, fastest connections in the northern

hemisphere via Helsinki the best network to the world from its home markets.

Strategic objectives:

Double Asian traffic by 2020 from the 2010 level Deliver a unique customer experience and achieve

world-class operations Create shareholder value

Strategy Review 2015-2017


Strategic focus areas

10

Customer excellence

Intercontinental growth with Northeast Asia focus

People and Finnair culture

Digitalization

Funding & capital structure

World-class operations


Financial Targets

11

EBIT margin 6% over cycle

EBITDAR margin minimum of 17% over cycle

Adjusted gearing maximum of 175%

Return on Capital Employed (ROCE) minimum of 7%



Financials

Changes in the calculation method and reporting of unit revenues and - costs


13

6.05

Q1 RASKNew 2015

Fx effect

2. New constant currency calculation principle

5.93

RASK at constant currency

4.82

Q1 CASK ex. Fuel

New 2015

Fx effect

2. New constant currency calculation principle

4.66

CASK ex. Fuel at constant currency

5.81

Q1 RASK2014

Q1 CASK ex. Fuel

2014

1. Technical adjustments

FlyBe

Other adjustments

In flight 5.96

4.37

1. Technical adjustments

4.61

ChangesYoY

Q1 CASK ex. Fuel

New 2014

Q1 RASKNew 2014

FlyBe

In flightChanges

YoY

Other adjustments

Airline business: Q1 RASK & CASK development

1.7 %

-0.4 %1.4 %

4.7 %1.1 %

-5.9 %-0.1 %-6.6 %

20.3 %6.4 %

-2.2 %-0.3 %

10.1 %

-10% -5% 0% 5% 10% 15% 20% 25%

RASK, unit revenueRASK at constant currency

CASK, unit costCASK, excluding fuel

CASK, excluding fuel, at constant currencyFuel

Staff costsDepreciation & lease expenses

Traffic chargesGround handling

CateringMaintenance

Other expences*

Change, %


• Unit cost excluding fuel, at constant currency 1,1 %• Unit revenue at constant currency -0,4 %

IncludingFx and hedging

* Including Group management- , IT-, sales and marketing expences and other rents (Flybe)

Key figures Q1 2015 Q1 2014 Change % 2014

Revenue and resultRevenue, EUR million 540.4 543.3 -0.5 2,284.5Operational result, EBIT, EUR million -28.4 -34.2 17.1 -36.5Operational result, % of turnover -5.2 -6.3 1,0 %-p -1.6Operating result, EBIT, EUR million -8.3 -28.4 70.9 -72.5Operational EBITDAR, EUR million 19.2 17.4 10.0 176.6Result before taxes, EUR million -12.1 -33.9 64.3 -99.1Net result, EUR million -9.8 -28.1 65.0 -82.5Balance sheet and cash flowGross investment, EUR million 12.4 33.1 -62.4 82.4Net cash flow from operating activities, EUR million 13.0 -20.5 163.2 24.2ShareShare price at the end of quarter, EUR 3.20 2.69 2.48Earnings per share from the result of the period, EUR * -0.08 -0.22 65.1 -0.65Earnings per share, EUR -0.09 -0.24 60.5 -0.71


Key Figures

* Before Hybrid Bond interest

Operational result in Q1 2014 vs. Q1 2015


-34.2-28.4

1.4

6.2

-21.0

-1.3

-10.9

-8.9

9.7

26.3

-0.11.72.7

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

Segment results: Airline Business


80 %

9 %

6 % 5 %

Airline Business revenue511 M€

Pax revenue Cargo Other Ancillary

• Segment profitability significantly improved y-o-y, result still at loss• Passenger revenue and ancillary sales grew significantly• Cargo share of segment revenue decreased mainly due to discontinuation of

dedicated cargo freighter flights, Cargo profitability improved substancially

Key figures 1–32015

1–32014

Change %

1–12 2014

Revenue and resultRevenue, EUR million 510.8 508.1 0.5 2,167.7Operational result, EUR million -24.1 -34.5 30.1 -43.5Operating result, EBIT, EUR million -3.8 -28.2 86.4 -78.4

Operating result, % of revenue -4.7 -6.8 2.1%-p -3.6PersonnelAverage number of employees 3,976 4,533 -12.3 4,232

Segment result: Travel Services


• The revenue of declined substantially y-o-y due to decreased demand and subsequent adjustment of Suntours package tour supply.

• The profitability of Suntours fell short of expectations in spite of the restructuring of operations and the result showed a substantial loss.

• The revenue of the business travel agency SMT was flat y-o-y and its operational result showed a slight profit.

Key figures 1–32015

1–32014

Change %

1–12 2014

Revenue and resultRevenue, EUR million 61.2 74.2 -17.5 216.7Operational result, EUR million -4.3 0.3 <-200 7.0Operating result, EBIT, EUR million -4.4 -0.3 <-200 5.9

Operating result, % of revenue -7.0 0.4 -7.4%-p 2.7 PersonnelAverage number of employees 588 704 -16.4 645

Operating costs 573 M€, -1.6% Fuel largest cost item


Muutos, %

-9.8 %

23.2 %

29.1 %

-5.5 %

4.2 %

-24.9 %

-4.4 %

21.1 %

-4.2 %

0.1 %

-6.0 %

-1.6 %

-40% -20% 0% 20% 40%

Other expenses

Sales and marketing

Leasing

Tour operations

Maintenance

Depreciation

Other rental payments

Traffic charges

Ground handling and catering

Staff costs

Fuel

Total

26%

16%

11%11%

9%

7%

6%

5%

4%4% 3%

Fuel Staff costsTraffic charges Ground handling and cateringOther costs Other rental paymentsMaintenance DepreciationTour operations LeasingSales and marketing

53%39%

8%

EUR USD* Others

64%13%

7%

6%

5%3% 2%

EUR Others JPY SEK CNY KRW USD

Currency Split, Q1

Sales currencies


Purchase currencies

Fuel, spot-price development

300

400

500

600

700

800

900

1000

1100

1200USD/Tonne

Swaps 31.03.2015

Swaps 31.12.2014

Swaps 31.12.2013

Swaps 31.12.2012

Swaps 31.12.2011

Swaps 31.12.2010

Realised price


Jet fuel December 2009 – March 2015

USD appreciation and hedges diluted the benefit from fuel price decrease

• Q1 2014 Hedging loss 3.4 Mill. Eur

• Q1 2015 Hedging loss 37.2 Mill. Eur

Q1 Comparable fuel cost, M€

161 151

1

33-71

27

0

20

40

60

80

100

120

140

160

180

Q1/2014 Volume Price Currency Hedgingdeviation

Q1/2015


Net debt 123 M€ negative, Cash 516 M€

-40

-20

0

20

40

60

80

100

120

2011 2012 2013 2014 1Q 2015

Strong Balance Sheet

Equity ratio Gearing Adjusted gearing

%


-150

0

150

300

450

600

2011 2012 2013 2014 1Q 2015

Good Cash position

Net cash flow from operating activitiesGross capital expenditureCash and Cash equvalents

M€

Rolling Hedging policy


Hedging positions as of 31 March 2015Hedging ratio for 2015: 64 %

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

• Finnair’s fuel purchases are 71% hedged for the H1 and 58% 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


Documents

Q1 2015 EN Final - Finnair · Q1 2015 Result 7 May 2015 ... Turbulent market environment • The weakness of the Finnish economy continued to be reflected in the demand in the first