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Finnair GroupInterim Report1 January – 31 March 2008


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


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


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


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


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


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


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

http://www.earlyjack.com/


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


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


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


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


Capacity in Asia has grown rapidly

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008

KoreaIndiaJapanChinaThailand


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%


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


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


Fuel price at record high


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.


Hedging policy for fuel (Scheduled traffic 31 March 2008)

normmax

min


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


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%


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


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


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


Appendices


Quarterly change in profitability

-50

-40

-30

-20

-10

0

10

20

30

40

50

60


MEUR

2003 2004 20052002 2006 2007

Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and non recurring items)

2008


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 2008


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


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


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%


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%


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


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

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

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