Finnair Investor Presentation

1

Hybrid Roadshow PresentationSeptember 2015

© Finnair | February 2016

© Finnair | September 2015

Finnair Investor PresentationFebruary 2016

Finnair at a glance

2 © Finnair | February 2016

Travel Services

• Customer excellence (across 2 classes of travel2)

• Intercontinental growth with Northeast Asia focus

• People and Finnair culture

• Digitalisation

• Funding and capital structure

• World-class operations

• Finnair founded on 1 November 1923

• First talks of long-haul expansion to the USA

• Flights from Helsinki (via Copenhagen and Amsterdam) to New York start

• Finnair receives its first wide-body aircraft, the DC-10 which carried 300 passengers

• Start of Far Eastern expansion with direct flights to Bangkok

• First European carrier to offer non-stop flight to Tokyo

• First Western European airline to operate non-stop routes between Europe and China

• Operating scheduled flights to 18 long-haul destinations across Asia and North America, in

addition to over 60 European destinations

1923

1930’s

1969

1976

Today

91.1%3

1. Stake held via Prime Minister’s Office2. Business Class and Economy; long-haul and short-haul variations3. Revenue after Group eliminations4. Includes: extra baggage fees, advance seat selection, upgrade options, Economy comfort product in long-haul, Sky Bistro in short-haul economy, Wi-Fi in

long haul economy 5. In 2014 included: Travel Retail Store operations, Finncatering business

State of Finland1

55.8%

Others44.2%

Organisation set-up and key shareholders

Strategic focus areas

Brief history of Finnair’s long-haul expansion

Key revenue sources and split

€2,324 MM

(2015)

Airline Business

Airline Business

Travel Services

8.9%3

Passenger transportation

Ancillary4

Cargo

82.6%

4.9%

8.7%

Tour operators

Travel agencies

1975

1983

1988

Other53.7%

Finnair: The Finnish flag carrier, focussed on connecting Europe and Asia, with a compelling strategy in place to achieve its financial targets


1. Well positioned in the domestic market to benefit from stable incumbent traffic and expected growth from Asian markets

2. Favourable geographic location and modern, efficient airport (hub) infrastructure

3. All-Airbus wide-body fleet delivers strong economic benefits…

4. … With delivery of the new technology A350, the foundation of its strategy of highly disciplined and profitable growth

5. Cost efficient growth of feeder capacity as the average size of narrow body aircraft increases

6. Track-record of achieving cost savings, turnaround in 2015

7. Net cash position and demonstrated capital discipline, relatively low net capital commitments for coming years


1

1. MIDAS capacity data for Finnair’s Helsinki-Europe destinations market share, excluding seasonal routes; L12M2. MarketLine Industry Profiles: Airlines in Italy, Finland, Germany, France, United Kingdom and Spain, May 2015; value is defined as the total revenue obtained by airlines

from transporting passengers from all airports (departures) within specified country (excluding transit arriving and departing on same flight code); CAGR in $ terms3. OAG data 2015, as of September 2015: green tick indicates market share of carrier in specific market is material (3% or more)

Key highlights• Finnish flag carrier, with

over 55% market share in traffic from Helsinki to Europe

• Supportive market dynamics, with strong growth expectations, amongst highest growth profiles of largest European airline industries

• Relatively small market size has limited LCC presence historically, with only Norwegian as material competitor in point-to-point traffic

Strong domestic positioning and market dynamics…

4

… in a stable and growing market2…

1.9

4.5

4.7

5.2

5.9

9.2

1.4

5.7

5.7

5.0

3.8

5.3

0 5 10 152010-2014 value CAGR 2014-2019 value CAGR

2014 Market value (€ MM)

Ryanair

easyJet

Norwegian

Vueling

germanwings

Leading market position1…

… with limited LCC presence3, safeguarding leadership

Finnair55%

Others45%

7,277

1,340

18,415

11,859

14,373

12,283

Finland vs 5 largest European airline industries CAGR (%)


Key highlights• Finnair offers smooth and

fast connections in the northern hemisphere, with specific focus on Asia

• Core Finnair strategy is to double Asian traffic by 2020, from 2010 levels

• Currently, Finnair serves 151 Asian destinations across 9 countries, to a mix of financial centres and leisure destinations

• Finnair also serves 3 North American destinations2

• Furthermore, as member of the oneworld alliance and the Japan-Europe / Atlantic Joint Business Agreements, Finnair benefits through partnerships with among others: Japan Airlines and British Airways for Europe / Japan traffic and American Airlines for North Atlantic traffic

Core strategy of connecting Europe and Asia...

1 … Supported by core strategy to connect Europe and Asia…

Over 60 European

cities

13 Asian mega-cities

... Supported by Joint Business Agreements to strengthen position and geographical reach...

Atlantic(AJB)

Japan-Europe(SJB)

... in addition to membership in the broader oneworld alliance

1. Fukuoka and Guangzhou to be added in summer 20162. New York, Miami and Chicago in the US 5


Key highlights• Asia has been one of the

fastest growing aviation markets in recent years and is set to continue to account for a greater share of the global aviation market in the short to medium term

• With higher exposure to Asia than peer European network carriers, Finnair is ideally positioned to benefit from future growth in Asian aviation markets

• Concurrently, the diversity of Asian destinations served helps to reduce the exposure to individual country macro shocks on Finnair

... Positioning Finnair to benefit the most from growth in Asian aviation markets

1 … Positioning Finnair well to capture growth from Asian markets

1. Peers selected on basis of market share in excess of 4.0%2 and RPK(Revenue Passenger Kilometers) split reporting2. Midas capacity data for Europe to Asia Finnair routes only, seasonal routes not included, July 2015; IAG market share refers to BA only3. Airbus GMF 2015

51.4

23.4 23.1

8.9

48.6

76.6 76.9

91.1

0

25

50

75

100

Finnair Air-France KLM Lufthansa IAG

Asia Other

Exposure to Asia largest amongst peer European network carriers with significant market share on Europe to Asia routes…

5.2%6.0% 8.1%4.6%

Market share (%)2

RPK contribution (%)1

Asia-Pacific29%

Europe25%

North America25%

Middle East9%

Others12%

Total RPK 2014: 6.2 Trn3

Total RPK 2034: 15.2 Trn3

20-year CAGR (%)

Asia-Pacific36%

Europe21%

North America17%

Middle East13%

Others13%

5.7%

3.6%

6.7%

2.5%

6


Key highlights• Geographical advantage

(proximity) to serve fast-growing Asian markets, allowing most direct and shortest routes

• Only European carrier achieving 24 hr aircraft rotations on many Asian routes1

• On average over 2 hr less total travel time relative to 1-stop itineraries via European hubs and over 4 hr less total travel time relative to 1-stop itineraries via Middle-Eastern hubs3

• Benefit from Helsinki-Vantaa Airport’s hub strategy, focused on competitive positioning (passenger convenience / experience and cost) in Europe–Asia traffic segment

Helsinki advantageous geographic location...

1. Finnair is the only EU carrier able to serve Asian routes in 24 hr rotations, with Singapore as the only current exception2. FINAVIA airport charges comparison sample: cost calculator implying average cost per Pax for Airbus A340-300,

based on: international routes, MTOW 275 tonnes, MLW 192 tonnes, capacity 260, load factor 75%3. Average time saved, compared to major European and Middle-Eastern hubs

2 Favourable geographic location and modern, efficient airport (hub) infrastructure

26.1 31.653.4

76.3100.1

0

25

50

75

100

HEL CPH ZRH VIE FRA

... Allows Finnair to be the only European carrier able to operate 24 hr aircraft rotations on all but one of its current Asian routes1...

Sustainable competitive advantage based on location:

Tokyo – Hamburg

Direct (no service) 9 014 km

Via Helsinki 9 021 kmVia Frankfurt 9 805 km

Via Dubai 12 882 km

Sustainable competitive advantage and cost benefits:

• Very high aircraft utilisation in long-haul traffic (highest utilisation rates of any airline in terms of block hours for A330s in operation)

• Less need for additional crew members

• Lower fuel consumption due to shorter flight times

• Eco smart, sustainable choice as shortest route with a stop over generates less emissions

Average cost per pax2 (€)

... Whilst also benefitting from Helsinki-Vantaa Airport’s comparatively low costs vs selected other main airports in Europe


Key highlights• For a carrier of Finnair’s

size, an all-Airbus fleet increases operational efficiency and flexibility by allowing centralised spare parts, more streamlined maintenance programs, and optimised crew allocation

• With an average fleet age of 10.1 years1, Finnair is on the lower end of key peers

• The replacement of older A340s with the new A350 aircraft will further improve the average fleet age comparison with key peers (the A340 is one of the oldest aircraft types in Finnair’s fleet, with an average age of 10.7 years1)

3 All-Airbus wide-body fleet delivers strong economic benefits…

1. Finnair fleet as of 31 Dec 2015, excluding Embraer fleet operated by Norra2. Owned or finance lease3. Will be phased out by 2017, being replaced by the A3504. Total outstanding orders: 19; 3 deliveries to date5. Reported average fleet age for peers, as of: 31 December 2014 for Aer Lingus, IAG and Lufthansa; 31 March 2015 for Air France-KLM; and 31 July 2015 for SAS

Overview of Airbus fleet: 46 aircraft in total1 Average fleet age vs peer European network carriers

9.68

10.1

10.1

10.9

11.5

11.9

0 5 10 15

Aer Lingus

Finnair

IAG

Air France-KLM

Lufthansa

SASAircraft Type

7Airbus A319 2

Owned2 Leased

6Airbus A320 4

4Airbus A321* 7

3Airbus A330 5

5Airbus A340(3) -

Airbus A350(4)

Years1,5

1 2


Finnair was the first European carrier to receive the new generation A350 in October 2015

1. Long-haul capacity evolution with A350 deliveries, baseline plan4

4 … With delivery of the new technology A350, the foundation of its strategy of highly disciplined and profitable growth

Front Business compartment Flex compartment

Convertibility allows c. 10% capacity adjustment

1. Last deliveries in 20232. Compared to Finnair’s existing A340-3003. Estimated 30% cost advantage per seat compared to Airbus A340, Airbus Estimate at 2014 fuel prices4. Baseline plan, with flexibility to scale up or down based on market conditions

Key highlights• Finnair was the first

European carrier to receive the new Airbus A350 in October 2015, allowing:– Enhanced in-flight

service offering– 10-20% more

capacity2

– An estimated 30% cost advantage3

• The replacement of the existing A340 fleet by the new A350 (to be completed by 2017) will increase Finnair’s long-haul capacity by approximately 10-20%, supporting the core strategy to increase revenues from Asia

... Which in addition to significant cost advantages3, will provide

unique capacity flexibility

0

5

10

15

20

25

2015 2016 2017 2018 2019 2020

A330 A340 A350

Aircraft


5 … Preparing for long haul growth: average size of narrow body aircraft increases, more feeder capacity with new deliveries

Key highlights

• Capacity balance with the current bank structure requires larger aircraft for feeder traffic

• Larger average aircraft size supports cost efficient capacity deployment

Larger aircraft, younger fleet New deliveries, more seats

• New deliveries of leased A321’s from summer 2016 onwards: – Temporary leases for 2 aircraft for

summer 2016 – Long term leases for 6 new aircraft in

2017-2018

• More seats to Airbus narrow bodies:– 6 to 13 additional seats per aircraft

• Embraer fleet downsized

Aircraft Type

7Airbus A319 2

Owned2 Leased

6Airbus A320 4

4Airbus A321* 7

3Airbus A330 5

5Airbus A340 -

Airbus A350 1 2


Key highlights• Demonstrated ability to

achieve and outperform on structural cost savings programs, leading to significant reduction in unit costs since 2010

• During 2010-2014, the cost savings program delivered annual cost reduction of c. €217 MM compared to 2010, outperforming initial €200 MM target

• Re-focus activities on core Airline Business between 2011-2014, as evidenced by outsourcing of ground handling operations, sale of catering unit to LSG in 2014 and sale of Finnair Travel Retail’s shops at Helsinki-Vantaa Airport to World Duty Free also in 2014

Savings from Cost Savings Program (2010-2014)achieved in all categories1...

6 Track-record of achieving cost savings

Personnel Related

21%

Maintenance16%

Fleet14%

Catering13%

Other13%

Ground Operations

9%

Sales & Distribution

9%

Fuel5%

1. Split of cost savings across different cost categories2.ASK (Available Seat Kilometers ), CASK (Cost of Available Seat Kilometers)

Total savings: €217 MM p.a. relative to 2010

... Reducing unit costs by 13.4% from 2010 levels

4.97

4.31

-0.6 %

-2.9 %

-1.1 %

-1.8 %2.5 %

-2.3 %

-2.1 %

0.0 %

-5.1 %

3.8

4.0

4.2

4.4

4.6

4.8

5.0

5.2Bridge to 2014 CASK (excl. fuel € cents / ASK)2


Key highlights

• Full-year operational profit of 23.7 M€

• Q4 was fifth consecutive quarter of result improvement

• Growth begun with the A350 entry into service

• Record number of 10.3 million passengers

• Good result performance from Travel Services

• Ancillary revenue grew markedly (by 42% in Q4) and was over 100 M€

Revenue grew in line with new capacity1...

6 Turnaround year 2015: Revenue and operational result returned to growth

1. ASK’s (Available Seat Kilometers) grew by 3.1% in 2015, first A350 deliveries in Q4

... And Operational result returned to profit

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

2011 2012 2013 2014 2015-80

-60

-40

-20

0

20

40

60

2011 2012 2013 2014 2015

346 333

695 708

0

200

400

600

800

1000


Key highlights• Strong cash position to

reduce impact of moderate industry shocks and support continued business operations and near-term investment

• Strong balance sheet position with low gearing ratio

• Low adj .net debt / EBITDAR supported by strong cash flow, Hybrid Bond Issuance and Sale-Leasebacks

• 66% of fleet value unencumbered4

Strong cash position1 and improving conversion Adj net debt2 composition and leverage to LTM EBITDAR3

1. Cash funds calculated as: cash and cash equivalents + other financial assets2. Calculated as: LT debt + ST debt + capitalised operational lease expenses (7x) – (cash equivalents + other financial assets)3. Earnings Before Interest Tax Depreciation Amortisation and Rent4. Of all aircraft owned by Finnair, as at 31 December 2015

7 Net cash position and demonstrated capital discipline

%

€ MM

Strong balance sheet and falling gearing ratio

€ MM

1.4Adj. Net Debt/ LTM EBITDAR171

330448

708

0

150

300

450

600

750

2013 2014 2015Net operating cash flow Gross investmentsDivestments Liquid funds

35.5

-50

45.8

-100

-50

0

50

100

150

2013 2014 2015Equity ratio Gearing Adjusted gearing


Key highlights

• Total capital commitments amounted to 1 818 M€ at the end of 2015. Capital commitment for 2016 & 2017 amounted to 745 M€ but when decreasing committed divestments, the net commitment are 376 M€in total.

• * Excluding other planned, but not yet contractual investments and divestments

Net investment commitment of 276 M€ for 2016-2017

1. * Excluding other planned, but not yet contractual investments and divestments

7 Relatively low net capital commitments* for coming years

€ MM


15

Outlook for 2016 and financial targets

Financial targets confirmed on 7 May 2015• 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%

Outlook for 2016 as announced on 10 February 2016

• Despite of the demand outlook for passenger and cargo traffic in Finnair’s main markets involving renewed uncertainty, Finnair estimates that, in 2016, its capacity and revenue will grow.

• The lower price of jet fuel supports Finnair’s financial performance in 2016. In accordance with its disclosure policy, Finnair will issue guidance for its expected full-year operational result in connection with the January-June interim report.

Kiitos

16 © Finnair | February 2016

Thank you


Appendix

Q4 revenue increased by 6%, operational result in profit

• Revenue increased 5.9% to 586 M€– Growth in passenger traffic & Travel services– Ancillary sales + 42%– Revenue from Cargo decreased

• Operational result* turned to slight profit of 0.8 M€, increased by 10 M€– Fuel cost -21 M€, OPEX +21 M€, +3.8%

in total

• Fx impacts increased both unit revenues and costs

18

* Operational result (EBIT), excluding non-recurring items and changes in the fair value of derivatives and in the value of foreigncurrency denominated fleet maintenance reserves. Finnair Q4 & FY 2015 Result, 10 February 2016

450

500

550

600

650

Q1 Q2 Q3 Q4

Revenue, M€

2013 2014 2015

585

0.8

-40

-20

0

20

40

60

80

Q1 Q2 Q3 Q4

Operational result, M€

2013 2014 2015

Non-recurring items contributed 100 M€ to operating result

Non recurring items included:

• The sale and leaseback of two new A350 aircraft

• Negative non-recurring items related to the phasing out of A340 aircraft

• The sale of certain properties at Helsinki Airport to Finavia

• The sale of Estravel

Finnair Q4 & FY 2015 Result, 10 February 201619

Q4: Positive trend in passenger traffic and travel services, revenue from cargo decreased

20

0

100

200

300

400

500

600

700

Q4 2014 Q4 2015

Ticket revenues Ancillary servicesCargo Other revenueTravel Services

553 M€585 M€

+8 %

-18 %

-13 %

+9 %

+42%

• Passenger traffic ticket revenue, ancillary sales and travel services revenue grew significantly y-o-y.

• Cargo revenue decreased, partly reflecting the discontinuation of cargo freighter flights in 2014.

• Other Group External revenue decreased mainly due to sale of Travel Retail store operations in October 2014.


Q4: Strong development in passenger traffic

21 Finnair Q4 & FY 2015 Result, 10 February 2016

ASK: Available Seat KilometresRPK: Revenue Passenger Kilometres

PLF%: Passenger Load Factor, %ATK: Available Tonne KilometresRTK: Revenue Tonne Kilometres

Ticket revenue: passenger revenue including leisure flightsAtlantic/Europe-Japan Joint Business contribution included in the figures.

*Includes cargo freighter flights

North America

ASK mill km 597.5 54.2 %

RPK, mill km 470.2 52.5 %

PLF% 78.7 -0.9 %-p

Ticket revenue 46.4 %

Europe

ASK mill km 3,111.5 5.7 %

RPK, mill km 2,407.6 7.0 %

PLF% 77.4 0.9 %-p


Asia

ASK mill km 3,794.8 1.7 %

RPK, mill km 3,038.2 2.6 %

PLF% 80.1 0.7 %-p


Domestic

ASK mill km 411.6 23.2 %

RPK, mill km 276.1 24.5 %

PLF% 67.1 0.7 %-p


Cargo*ATK mill km 338.8 2.9 %

RTK mill km 209.7 -6.9 %

Cargo revenue -16.0 %

Total traffic

ASK mill km 7,915.4 7.0 %

RPK, mill km 6,192.1 7.8 %

PLF% 78.2 0.6 %-p


44%

40%

10%6%

Ticket Revenue Split, M€

Europe

Asia

Domestic

North America

22

Key figuresKey figures (€ MM, unless otherwise specified) Q4 2015 Q4 2014 Change, % 2015 2014 Change, % 2013

Revenue and resultRevenue 585.5 552.7 5.9 2,324.0 2,284.5 1.7 2,400.3Operational EBITDAR 59.5 43.5 36.7 231.2 176.6 30.9 210.1

Operational EBITDAR, % of turnover 10.2 7.9 9.9 7.7 8.8Operational result 0.8 -9.3 > 200 23.7 (36.5) > 200 11.9

Operational result, % of turnover 0.1 -1.7 1.8 1.0 (1.6) 2.6 (0.5)Operating result, EBIT 85.0 -41.4 > 200 121.7 (72.5) > 200 (7.9)Net result 66.5 -47.1 > 200 89.7 (82.5) > 200 22.9Balance sheet and cash flowEquity ratio, % 35.5 27.3 8.2 32.6Gearing, % -49.8 0.3 (50.0) 19.9Adjusted gearing, % 45.8 107.5 (61.7) 79.2Gross capital expenditure 291.5 14.0 > 200 329.7 82.4 > 200 77.3ROCE, 12 months rolling, % 12.2 (6.5) 18.7 3.6ROE, 12 months rolling, % 14.4 (13.8) > 200 3.2Net cash flow from operating activities 7.1 -15.7 > 200 171.0 24.2 > 200 142.4Debt and leverageAdjusted net debt1 333 578.3 547.3Adjusted net debt / EBITDAR x 1.4x 3.3x 2.6x

1. Calculated as: LT debt + ST debt + unfunded pension liabilities + capitalised operational lease expenses (7x) – (cash equivalents + other financial assets) © Finnair | February 2016

Traffic key figures

Key figures Q4 2015 Q4 2014 Change % 2015 2014 Change %

Traffic data, unit costs and revenuePassengers, 1,000 2,532 2,273 11.4 10,294 9,630 6.9

Available seat kilometres (ASK), million 7,915 7,395 7.0 31,836 30,889 3.1

Revenue passenger kilometres (RPK), million 6,192 5,744 7.8 25,592 24,772 3.3

Passenger load factor, % 78.2 77.7 0.6-p 80.4 80.2 0.2-p

Unit revenue per available seat kilometre, (RASK), cents/ASK * 6.30 6.29 0.2 6.35 6.23 2.0

RASK at constant currency, cents/ASK * 6.23 6.29 (1.1) 6.17 6.23 (1.0)

Unit revenue per revenue passenger kilometre (yield), cents/RPK * 6.88 6.78 1.5 6.85 6.65 2.9

Unit cost per available seat kilometre (CASK), cents/ASK * 6.50 6.68 (2.7) 6.52 6.53 (0.2)

CASK excluding fuel, cents/ASK * 4.81 4.64 3.6 4.67 4.49 3.9

CASK excluding fuel at constant currency, cents/ASK * 4.70 4.64 1.2 4.52 4.49 0.6


*Unit revenue per available seat kilometre (RASK), unit revenue per revenue passenger kilometre (yield) and unit cost per available seat kilometre (CASK) for the comparison year 2014 have been restated to better reflect the changes in the Group structure. RASK and CASK at constant currency exclude the impact of exchange rates.

Operational result 2014 vs. 2015, M€


Airline Business improved y-o-y

Revenue by quarter, M€ Operational result by quarter, M€


0

100

200

300

400

500

600

700

Q1 Q2 Q3 Q4

2014 2015

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

Q1 Q2 Q3 Q4

2014 2015

Strong result in Travel Services

Revenue by quarter, M€ Operational result by quarter, M€


0

10

20

30

40

50

60

70

80

Q1 Q2 Q3 Q4

2014 2015

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Q1 Q2 Q3 Q4

2014 2015

Appreciation of USD dampened the decrease of fuel cost throughout the year Q4 2014 vs. Q4 2015 2014 vs. 2015

• Q4 2015 hedging loss 35.9 M€• 2015 hedging loss 136.9 M€


Changes in Balance Sheet; Cash funds and Equity increased

28

Assets, M€ Equity & Liabilities, M€


29

Fuel and currency sensitivities & currency split

* The sensitivity analysis assumes that the Chinese yuan and the Hong Kong dollar continue to correlate strongly with the US dollar..

Fuel sensitivities 10% change without hedging

10% change, taking hedging into account

Hedging ratio

(rolling 12 months from date of financial statements) H1 2016 H2 2016

Fuel EUR 32 million EUR 14 million 68% 53%

Currency distribution %

10–12 2015

10–122014 2015 2014

Currency sensitivities USD and JPY (rolling 12 months from date of financial statements)

Hedging ratio (rolling 12 months from date of financial statements)

Sales currencies 10% change without hedging

10% change, taking hedging into account

EUR 64 60 59 58 - -

USD* 2 2 3 3 see below see below see below

JPY 7 8 8 9 EUR 18 million EUR 9 million 67%

CNY 5 6 7 7 - -

KRW 2 2 3 3 - -

SEK 5 6 5 5 - -

Other 15 16 15 15 - -

Purchase currencies

EUR 54 52 53 52 - -

USD* 37 41 40 41 EUR 56 million EUR 10 million 81%

Other 9 7 7 7


Rolling Hedging policy


Hedging positions as of 30 September 2015Hedging ratio for H1 2016: 68%

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

• Finnair’s fuel purchases are 68% hedged for H1 2016 and 53% for H2 2016.

• 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.

Finnair Investor Presentation

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