Finnair Group

Finnair GroupInterim Report 1 January – 30 September 2007

Finnair meeting expectations

Strong demand in scheduled traffic continuesIn addition to Asia, European traffic is also growingFinnair’s market share growing in international traffic departing from Finland Unit revenues decreased due to new launches, price level improving towards end of yearUnit costs have fallen thanks to efficiency measuresFlyNordic sold to Norwegian Air Shuttle, 14 million euro sales profit

Improved results by efficiency programme

Q3/2007 Q3/2006 Change %

Turnover mill. € 545.2 515.4 5.8

EBITDAR excl. capital gains, fair values changes of derivatives and reorganization expenses

88.0 69.8 26.1

EBIT excl. capital gains, fair values changes of derivatives and reorganization expenses

39.2 22.5 74.2

One off items/ capital gains 17.3 0.1 -

Fair value changes of derivatives 3.4 -7.9 -

Operating profit/loss (EBIT) 59.9 14.7 -

Profit after financial items 55.9 13.5 -

Scheduled Passenger Traffic and Aviation Services improved

Profitability of scheduled traffic improved clearly, even as unit revenues decreasedUnit costs have fallenFinnair Technical Services efficiency project is bearing fruitAverage prices for cargo have fallen due to tighter competition, but demand is picking up Catering profitability improvedNorthport still loss-making: Sweden ja Norway operations to be sold to Menzies Aviation

Aurinkomatkat-Suntours expands

Finland’s leading tour operator, strategy to expand in neighbouring areasAcquired Estonia’s second largest tour operator Horizon Travel at start of year…and St Petersburg area tour operator and travel agency Calypso in OctoberGrowing target group increasingly wealthy middle class in RussiaWinglets installed on Leisure Traffic fleet (seven Boeing 757-200s), decreasing fuel consumption by five per cent

Unit costs decreased more than yield Change 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

% Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007

Efficiency programme yielding results

80 million euro efficiency programme completed by end of yearEffect felt strongest in the second half of the yearProfit impact for 2007 over EUR 40 millionFull financial impact will begin in 2008Jobs cut by around 600 in 2006-07

Business growing, number of staff stable

0

2000

4000

6000

8000

10000

12000

14000

1999 2000 2001 2002 2003 2004 2005 2006 Q3 2007

Personnel on averagePersonnel

Unit costs droppingQ3/2007 2006

Unit costs of flight operations* c/ATK -7.7% +1.8 %

Unit costs of flight operations excl. fuel* c/ATK

-9.5% -3.5 %

Personnel expenses c/ATK -7.2% -4.1 %

Fuel costs c/ATK -2.0% +24.1 %

Traffic charges c/ATK -7.3% -3.9 %

Ground handling and catering €/passenger +18.7% -1.0 %

Sales and marketing €/passenger -12.3% -7.9 %

Aircraft lease payments and depreciation c/ATK

-1.7% +1.9 %

Other costs c/ATK -15.3% -3.1 %

* excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Productivity improved

Productivity (incl. Aero and FlyNordic) (ATK/ person) 12 m rolling sum

240

290

340

390

440

490

540

01

/01

04

/01

07

/01

10

/01

01

/02

04

/02

07

/02

10

/02

01

/03

04

/03

07

/03

10

/03

01

/04

04

/04

07

/04

10

/04

01

/05

04

/05

07

/05

10

/05

01

/06

04

/06

07

/06

10

/06

01

/07

ATK1000/ person

Jet fuel prices going up

Jet fuel price risk hedging (Scheduled traffic, 30.9.2007)

62%

70%

2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2

Fuel costs a fifth of turnover2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: ~20% of turnover (approx. 450 MEUR)

Finnair scheduled traffic has hedged 66% of its fuel purchases for the next six months, thereafter for the following 24 months with a decreasing level. Finnair leisure flights hedged 60% of summer traffic programme’s consumption.

Improved cash flow used for investments

Cash flow statement (EUR mill.) Q1-Q3/2007 Q1-Q3/2006

Cash flow from operations 169 23

Investments and sale of assets -226 -149Investments -264 -195Change of advances and others +38 +46

Cash flow from financing 32 73

Change in liquid funds -25 -53

Liquid funds at the beginning 273 339

Liquid funds at the end 248 286

Cash flow January-September

Strengthening of capital structure by share offering Equity ratio and adjusted gearing

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 Q3 2007

Equity ratio Adjusted Gearing%

Asia growth continues on good level

Demand grew during January-September by 30.9%, passenger numbers 25.8%, cargo 18.9%Passenger load factor 78.5%Business Class selling well59 flights a week to AsiaNon-stop flights to 10 destinations, daily to sixGrowth in different markets in Asia diversifies riskEnd of year capacity will grow by over 30%Seoul new destination in 2008

Capacity in Asia has grown rapidly

China 2001:3 flights/week2007:25 flights/week

Japan2001:2 flights/week2007:15 flights/week

India2006:3 flights/week2007:12 flights/week

Long-haul network 2007

7 New York

Tokyo 4Nagoya 4

Osaka 7Beijing 7Shanghai 7Guangzhou 4Hong Kong 7Bangkok 7

Delhi 7Mumbai 5

Helsinki

Over third of revenue from Asia

46 %

38 %

4 %12 %

Asia USDomestic Europe

Scheduled traffic passenger and cargo revenue January-September

Asia-Europegateway

50%

In 2007-14• A330/A340 fleet of maximum 15 planes in

total

In 2014-16• A350 fleet of maximum 15 planes in total

New planes enable future growth

Most modern European fleet

Average age of European fleet four years29 Airbus A320 family aircraftA total of ten smaller Embraer 170s and five larger Embraer 190s in fleet, five larger aircraft arriving laterNew aircraft increase flexibility and improve load factors, decrease costs and are eco-efficient

Planned share offering part of investment financing

Renewal and expansion of long-haul fleet part of Finnair strategyAircraft acquisitions in 2007-2016 amount to almost two billion eurosExtraordinary General Meeting 21.11.2007Size of offering up to 250 million euros, existing shareholders would have a pre-emptive right to subscribe

Finnair’s vision 2017

Take further advantage of Helsinki’s geographical positionVia Helsinki a travel conceptThe airline of choice for quality and environmentally conscious air travellers in intercontinental traffic in the Northern HemisphereA reliable and safe option in an uncertain worldAs large European airports become increasingly congested, Helsinki-Vantaa Airport has plenty of room for construction and possibilities for developmentSustainable, profitable growth, an attractive investment

Finnair 2017 – ”On top of the World”

India opens up new opportunities

Indian traffic makes it possible to open the fastest connections between North America and IndiaFinland is situated along the shortest routeDemand expected to grow significantlyRussia’s air traffic markets expected to open up in the future, offering opportunities to complement network

Success factors

Safe• Expert, professional people doing quality work• Modern fleet• Sound finances• Trust• Caring for customers and personnel

Finnish• Reliable, responsible, punctual, professional

Creative• Modern, developing, innovative

Fresh• Clean, stylish, refreshing, uncomplicated

Future outlook

Asian demand remains strongAverage price fall leveling out even though average route length increasingUnit costs still decreasingCooperation with Norwegian continuesExpensive fuel will not increase costs significantly at the end of year because of hedgingFive collective agreements renewedThe operational result for the full year is expected to exceed 70 million euros, last quarter profitable

Appendices

Profitability development

-50

-40

-30

-20

-10

0

10

20

30

40


MEUR

2003 2004 20052002 2006 2007

Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses)

Average yield and costs EUR c/RTK & EUR c/ATK

0

20

40

60

80

100

120


Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007

Segment results

2007 2006Q3 Q3

MEUR Scheduled Passenger Traffic 28.8 20.3Leisure Traffic 7.8 8.2Aviation Services 2.7 -4.6Travel Services 1.3 0.9Unallocated items -1.4 -2.3Total 39.2 22.5

Excluding capital gains, fair value changes of Derivatives and reorganization expenses

Investments and cash flowfrom operations

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50

100

150

200

250

300

2002 2003 2004 2005 2006 Q3 2007

Operational net cash flow InvestmentsMEUR

Aircraft operating lease liabilities

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 Q3 2007

MEUR Flexibility, costs, risk management

On 30 September all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 September 2007 would have been103,3%

ROE and ROCE Rolling 12 months

-4

-2

0

2

4

6

8

10

12

14

Q1 200

2

Q2 200

2

Q3 200

2

Q4 200

2

Q1 200

3

Q2 200

3

Q3 200

3

Q4 200

3

Q1 200

4

Q2 200

4

Q3 200

4

Q4 200

4

Q1 200

5

Q2 200

5

Q3 200

5

Q4 200

5

Q1 200

6

Q2 200

6

Q3 200

6

Q4 200

6

Q1 200

7

Q2 200

7

Q3 200

7

% ROE ROCE

Emissions trading for air traffic

EU air traffic accounts for only 0.5% of all CO2 emissions in the worldFinnair in favour of emissions trading principlesShould be globalCompetitively neutralInvestments already made in new technology should be taken into accountOpen emissions trading

Customers can make environmental choices when flying

Choose an airline with a modern fleetFly in the right direction all the way, without unnecessary stopovers• shorter flight routes result in less emissions

Avoid large, congested airports

By making these choices, fuel consumption and emissions can drop by at best 30%!

Finnair Financial Targets

”Sustainable value creation”

Operating profit (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

Economic profit

Pay out ratio Minimum one third of the EPS

Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 %

To create positive value over pretax WACC of 9,5%

Finnair’s Financial Targets

Description of targets

Operating profit (EBIT)

EBITDAR

Economic profit

Pay out ratio

Adjusted Gearing

Turnover + other operating revenues – operating costs

Result before depreciation, aircraft lease payments and 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

www.finnair.comFinnair Group Investor Relationsemail: [email protected]

tel: +358-9-818 4951fax: +358-9-818 4092

Finnair Group

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