Post on 25-May-2020
1 29/04/2008 Presentation name / Author
Finnair GroupInterim Report1 January – 31 March 2008
2 29/04/2008 Presentation name / Author
Outlook for the industry less positive
Growth of demand declining due to uncertainty of global economyGrowth of Asian traffic for European airlines zero, Finnair’s growth still over 23%Passenger load factors downFuel costs upBankruptcies and mergers taking place, more to comeCompetition distorting subsidies once again to Alitalia
3 29/04/2008 Presentation name / Author
Finnair in better result-making shape
Finnair’s operational result improved from last year’sfirst quarterUnit costs were clearly down despite expensive fuelEaster had a weakening effect on first quarter80 million euro efficiency programme has been fullycompletedMore difficult terrain aheadHealthier cost structurePoor punctuality in January-February, but improvedclearly in March-April
4 29/04/2008 Presentation name / Author
Improved results
Q1/2008 Q1/2007 Change%
9.1
6.2
91.4
-
-
-11.7
-40.9
Turnover mill. € 576.5 528.5
One off items/ capital gains 1.1 1.9
Fair value changes of derivatives -0.1 6.0
Operating profit/loss (EBIT) 12.1 13.7
Profit for period 5.5 9.3
Adjusted EBITDAR* 58.2 54.8
Adjusted EBIT* 11.1 5.8
*excl. capital gains, fair values changes of derivatives and non recurring items
5 29/04/2008 Presentation name / Author
ROE and ROCERolling 12 months
-4
-2
0
2
4
6
8
10
12
14
16
Q1 20
02Q2
2002
Q3 20
02Q4
2002
Q1 20
03Q2
2003
Q3 20
03Q4
2003
Q1 20
04Q2
2004
Q3 20
04Q4
2004
Q1 20
05Q2
2005
Q3 20
05Q4
2005
Q1 20
06Q2
2006
Q3 20
06Q4
2006
Q1 20
07Q2
2007
Q3 20
07Q4
2007
Q1 20
08
% ROE ROCE
6 29/04/2008 Presentation name / Author
Unit costs dropping
Q1/2008 2007
Unit costs of flight operations* c/ATK -5.3% -2.1%
Unit costs of flight operations excl. fuel* c/ATK
-11.2% -3.7%
Personnel expenses c/ATK -8.0% +0.2%
Fuel costs c/ATK +13.8% +3.6%
Traffic charges c/ATK -13.0% +1.1%
Ground handling and catering €/passenger
+14.8% +1.7%
Sales and marketing €/passenger +54.0% +16.0%
Aircraft lease payments and depreciation c/ATK
-16.9% -3.9%
Other costs c/ATK -17.7% -7.6%
* excluding fair value changes of derivatives and non-recurring itemsATK = Available Tonne Kilometre
7 29/04/2008 Presentation name / Author
Unit costs decreased more than yieldChange YoY
-20
-15
-10
-5
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
% Yield (EUR/RTK) Unit costs (EUR/ATK)
2004 2005 200620032002 2007 2008
8 29/04/2008 Presentation name / Author
Marketing and communicationsfocused abroad
Finnair’s strong growth has required directingresources globallySubstantial increase in marketing outside Finland to increase recognisability and salesSales, media and PR events in European and Asian destinationsLots of visibility in the media and focused activitiestowards travel agencies and business travel specialistsCentraly produced messages adjusted to local marketsand language eg. www.earlyjack.comSales curves are clearly turning upward
9 29/04/2008 Presentation name / Author
Leisure Traffic most profitable in firstquarter
Profitability of Leisure Traffic clearly improvedLoad factors and average prices for Scheduled Trafficdown, partly due to seasonal fluctuationGood demand and profitability in cargo trafficFinnair Technical Services’ competitiveness projectbearing fruitMoving to new facilities caused productiondisturbances in Catering and Northport
10 29/04/2008 Presentation name / Author
Efficiency programme materialized
80 million euro efficiency programme completedFull financial impact in 2008Jobs cut by over 600 in 2006-07Annual recruiting for flight operations 200 persons
11 29/04/2008 Presentation name / Author
Productivity is improvingProductivity (incl. Aero) (ATK/person) 12 m rolling sum
240
290
340
390
440
490
540
590
01.0
2
04.0
2
07.0
2
10.0
2
01.0
3
04.0
3
07.0
3
10.0
3
01.0
4
04.0
4
07.0
4
10.0
4
01.0
5
04.0
5
07.0
5
10.0
5
01.0
6
04.0
6
07.0
6
10.0
6
01.0
7
04.0
7
07.0
7
10.0
7
01.0
8
ATK1000/person
12 29/04/2008 Presentation name / Author
Business growing, number of staff stable
0
2000
4000
6000
8000
10000
12000
14000
1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 2008
Personnel on averagePersonnel
13 29/04/2008 Presentation name / Author
Capacity in Asia has grown rapidly
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006 2007 2008
KoreaIndiaJapanChinaThailand
14 29/04/2008 Presentation name / Author
40%
42%
3%15%
Aasia-Eurooppa
Via Helsinki>50 %
More revenues from Asia than EuropeDistribution of passenger and cargo revenues in scheduled traffic
Asia USDomestic Europe
Asia-Europegateway
>50%
15 29/04/2008 Presentation name / Author
Indian trafficspeeding up Asian growth
Asian demand grew by 23.4%, cargo 36.1% in Q1
Passenger load factor 74%
Business Class growing faster than average traffic
65 flights a week to Asia
Non-stop flights to 11 destinations, daily to six
Weekly flights to India upfrom 3 to 12 in one year
Seoul new destination in June
16 29/04/2008 Presentation name / Author
Long-haul network in summer 2008
7 New York
Tokyo 4Nagoya 4
Osaka 7Beijing 7
Shanghai 7
Hong Kong 7Guangzhou 4
Bangkok 7
Delhi 7Mumbai 6
Seoul 5
17 29/04/2008 Presentation name / Author
Fuel price at record high
18 29/04/2008 Presentation name / Author
Fuel costs nearly a fourth of turnover
2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: 20,2% of turnover2008: >23% of turnover
Finnair scheduled traffic has hedged 68% of its fuel purchases for the next six months, thereafter for the following 24 months at a decreasing level.
19 29/04/2008 Presentation name / Author
Hedging policy for fuel (Scheduled traffic 31 March 2008)
normmax
min
20 29/04/2008 Presentation name / Author
Improved cash flow used for investments
Cash flow statement (EUR mill.) Q1/2008 Q1/2007
Cash flow from operations 29 1
Liquid funds at the beginning 540 294
Change in liquid funds -79 -72
Investments and sale of assets -93 -67
Investments -64 -52
Change of advances and others -29 -15
Cash flow from financing -15 -6
Liquid funds at the end with financial interestbearing assets at fair value 461 222
Cash flow January-March
21 29/04/2008 Presentation name / Author
Strengthening balance sheetby cash flow and share issueEquity ratio and adjusted gearing
0
20
40
60
80
100
120
2002 2003 2004 2005 2006 2007 Q1 2008
Equity ratio Adjusted Gearing%
22 29/04/2008 Presentation name / Author
In 2007-14 a fleet of maximum 15 Airbus A330/A340 aircraft• Boeing MD-11 fleet will be phased out by March 2009
In 2014-16 a fleet of maximum 15 new technology Airbus A350XWB aircraft
New aircraft enable future growth
23 29/04/2008 Presentation name / Author
Most modern European fleet
Average age of Finnair’s European fleet approximatelyfour years29 Airbus A320 family aircraftTen smaller Embraer 170- eight larger 190 modelaircraft already in the fleet, five more arriving 2009-2011New aircraft have increased flexibility, improved loadfactors, reduced costs and are eco-efficient
24 29/04/2008 Presentation name / Author
Outlook
Asian demand continues to growCargo demand remains strongTwo new A340 wide-bodied aircraftIncreased fuel costs put pressure on cost base and pricingCollective labour agreement negotiations with pilotscontinueOperational result for January-June at last year’s level
25 29/04/2008 Presentation name / Author
Appendices
26 29/04/2008 Presentation name / Author
Quarterly change in profitability
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
MEUR
2003 2004 20052002 2006 2007
Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and non recurring items)
2008
27 29/04/2008 Presentation name / Author
Average yield and costs EUR c/RTK & EUR c/ATK
0
20
40
60
80
100
120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Yield (EUR/RTK) Unit costs (EUR/ATK)
2004 2005 200620032002 2007 2008
28 29/04/2008 Presentation name / Author
Segment results
2008 2007Q1 Q1
MEUR
Leisure Traffic 11.1 5.6
Total 11.1 5.8
Scheduled Passenger Traffic -0.4 -0.3
Aviation Services 2.5 3.3Travel Services 0.4 1.3Unallocated items -2.5 -4.1
Excluding capital gains, fair value changes of Derivatives and non restructuring items
29 29/04/2008 Presentation name / Author
Investments and cash flowfrom operations
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 Q1 2008
Operational net cash flow InvestmentsMEUR
30 29/04/2008 Presentation name / Author
Aircraft operating lease liabilities
0
100
200
300
400
500
600
2002 2003 2004 2005 2006 2007 Q1 2008
MEUR Flexibility, costs, risk management
On 31 March all leases were operating leases. If capitalised usingthe common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 31 March 2008 would have been42,1%
31 29/04/2008 Presentation name / Author
Finnair Financial Targets
”Sustainable value creation”
Operatingprofit (EBIT)
EBIT margin at least 6% => over 120 mill. € in the coming few years
EBITDAREBITDAR margin at least 17% => over 350 mill. € in the coming few years
Economicprofit
Pay out ratio Minimum one third of the EPS
AdjustedGearing
Gearing adjusted for aircraft lease liabilities not to exceed 140 %
To create positive value over pretax WACC of 9,5%
32 29/04/2008 Presentation name / Author
Finnair’s Financial Targets
Description of targets
Operatingprofit (EBIT)
EBITDAR
Economicprofit
Pay out ratio
AdjustedGearing
Turnover + other operating revenues – operating costs
Result before depreciation, aircraft lease paymentsand capital gains
Operating profit EBIT – Weighted Average Cost of Capital
Interest bearing debt + 7*Aircraft lease payments– liquid funds) / (Equity + minority interests)
Dividend per share / Earnings per share
33 29/04/2008 Presentation name / Author
www.finnair.comFinnair Group Investor Relationsemail: investor.relations@finnair.com
tel: +358-9-818 4951fax: +358-9-818 4092