FinnairQ1 Result 2012
27 April 2012Mika Vehviläinen
Content
• Main events of Q1 2012• Business performance in
Q1 2012• Structural reform and
cost savings programme• Outlook
• Figures
Turbulent competitive landscape in Europe
• Numerous market exits by competitors: – Bankruptcies and structural reforms
• Legacy carriers restructuring their loss-making short hauloperations
• Low cost carriers gaining market share
Finnair - Q1 result 27 April 2012
Q1 Main eventsMarket environment Strategy implementation Structural reform• The structural reform and
intense competition in the industry are visible in the competitive landscape:major cost savings, structural reform programmes, bankruptcies
• Conservative capacity growth in Europe, numerous market exits
• Passenger demand ahead of expectations, cargo demandremains stable
• Price of oil remains high, fuel cost up by 26.2%
Asia• Chongqing preparations• Asian corporate sales growth
over 14 %
Partnership strategy• Letters of intent in Catering and
Technical services• Continued search for solutions
to cost challenges in short haultraffic
Smooth travel experience• Customer satisfaction
continued to improve, among the best network carriers
Cost efficiency improved: • Unit cost excl. fuel (CASK)
down by 6.1% in 2011
• Target of 140 M€ annual savings by 2014
• Structural reform and cost savings program proceeds as planned and on track:
• target 70 M€ of realisedsavings during 2012
• To improve cost efficiency Finnair will focus on core business and continues to build a stronger partnershipnetwork around its business
Finnair - Q1 result 27 April 2012
Business performancein Q1 2012
Turnover
Turnover, mill. Eur2 257,7 Turnover growth*
+ 10,9% in January-March 2012
Asian passanger traffic revenue* +16% in January-March 2012
* Change year-on-year
Finnair - Q1 result 27 April 2012 6
533,7 591,8
539,4
607,2
577,4
0
500
1 000
1 500
2 000
2 500
2011 2012
Q1 Q2 Q3 Q4
Operating costsOperating costs, M€+7% in January-March 2012
Fuel costs, M€ **+26.2% in January-March 2012
132.8 167.6
131.7
144.3
146.4
0
100
200
300
400
500
600
2011 2012
Q1 Q2 Q3 Q4
** Hedging included
580.8 621.7
557.2
584.2
613.40
0
500
1 000
1 500
2 000
2 500
2011 2012
Q1 Q2 Q3 Q4
* Change year-on-year
2,335.6 555.2
7Finnair - Q1 result 27 April 2012
Cost Structure
18%
27%
3%5%7%9%
8%
6%3%
5%9%
Q1 2012
20%
23%
3%5%5%9%
8%
7%
4%5%
11%
Q1 2011
8Finnair - Q1 result 27 April 2012
Airline Business: RASK & CASK developmentQ1 2012
8.7%
2.0%
-4.7%
20.3%
1.4%
0.6%
-2.1%
-8.5%
-3.3%
-13.3%
RASK, unit revenue
CASK, unit cost
CASK, excl. Fuel
Fuel cost
Staff cost
Traffic charges
Ground handling & catering
Maintenance
Depreciation & lease expenses
Other expenses
9Finnair - Q1 result 27 April 2012
Wider range of new, affordable fares
• Finnair sold 435,000 lowest price category flights during Q1, which is more than the combined offering of the closest competitors fromHelsinki during the same period
• New affordable prices in domestic and Scandinavien routes havebeen well received, several successful campaigns
• Internet sales grew, especially in Finland
10
Cargo and Travel services had anegative effect on the result• Overall market demand for cargo has remained flat for the last two
years while passenger traffic gas grown significantly.• Cargo profitability was negatively affected by high fuel costs.
• The package tour market continued to have overcapacity. Production was adjusted from the previous year. However, the demand picked up markedly when compared to the end of the year 2011.
• The result of the Travel Services segment was affected negatively by non-recurring items.
11
Traffic performance• Available Seat Kilometers (ASK) grew in moderation mainly as a result of growth in
Asian traffic• Revenue Passenger Kilometers (RPK) grew significantly• Passenger Load Factor (PLF) improved significantly • Passenger revenues increased• Tsunami in Japan and the Arabic spring had an effect on 2011 performance in Q1
Q1 /2012 vs. Q1/2011ASK +3.9%- Asian share of ASK:s 47%RPK +9.1%PLF % +3.6%-pPassenger revenues +13%
12Finnair - Q1 result 27 April 2012
Traffic structure Q1 2012
47%
26%
5%
4%
18%
ASK
Asia Europe Domestic
North America Leisure
41%
32%
9%
3%
15%
Passenger revenues
Asia Europe Domestic
North America Leisure
13Finnair - Q1 result 27 April 2012
Transformation and cost saving programme
The Future FinnairCost competitiveness
140 M€ permanent reduction in cost level
Service excellenceFinnair designed for you
Partnership strategyPartner network and
alliances
Profitable growthStrengthening Asian
presence, business travel and tailored ancillary
services
Focus on core businessStructural solutions and
ongoing business improvement
Number 1 in the Nordic countries
Among the top three in Asian traffic
Doubling of Asian turnoverby 2020
Finnair - Q1 result 27 April 2012 15
Significant steps in implementing partnership strategy• Letter of Intent on the sale of Catering operations to LSG Sky Chefs
• Letter of Intent on sourcing engine and component services for Finnair’s aircraft from SR Technics, daily line maintenance continues to be part of Finnair’s operations
• Partnering agreements are an integral part of getting Finnair’soperations profitable
16
Targeting 80 M€ savings by end of 2012
Administration, marketing and
salesMaintenanceInflight and
support services Fleet and network Productivity of flying personnel
10M€ 70 M€
2011 2012
60 M€
201317
We have two targets
1. Growth in Asia and in the Nordiccountries
2. Improve competitiveness of our European traffic
Finnair - Q1 result 27 April 2012 18
Outlook
Outlook for 2012
• Operational result in the first half of 2012 is estimated to be clearly loss-making. The operational result for the second half of the year, which is traditionally stronger due to seasonal variations, is estimated to reflect improved profitability compared to the first half of the year.
• Passenger traffic capacity in its current structure and form is estimated to grow by around 5% in 2012.
• Fuel costs are estimated to be significantly higher in 2012 compared to the previous year.
• Costs reductions of 80 M€ out of the total of 140 M€ are estimated to be achieved by the end of 2012.
Finnair - Q1 result 27 April 2012 20
Q1 2012 figures
Key figuresJan-Mar
2012Jan-Mar
2011Change
%2011
Turnover and resultTurnover € million 591.8 533.7 10.9 2,257.7Operational result, EBIT € million -25.0 -43.1 42.0 -60.9Operational result, % turnover % -4.2 -8.1 3.9%-p -2.7Operating result, EBIT € million -20.2 -43.1 53.1 -87.8EBITDAR € million 24.9 3.6 - 139.6Result before taxes € million -26.2 -46.2 43.3 -111.5Net result € million -20.4 -33.8 39.6 -87.5Balance sheet and cash flowEquity ratio % 31.0 34.7 3.9%-p 32.6Gearing % 44.4 30.0 14.4%-p 43.3Adjusted gearing % 111.8 80.6 31.2%-p 108.4Capital expenditure, CAPEX € million 7.4 30.9 -76.1 203.9Return on capital employed, ROCE 12 months rolling % -4.07 -1.5 - -5.2Return on equity, ROE , 12 months rolling % -9.32 -4.2 - -10.9Net cash flow from operating activities € million -7.9 -33.9 76.7 50.8ShareShare price at end of quarter € 2.30 3.84 -40.1 2.30Earnings per share € -0.18 -0.28 35.7 -0.75
22Finnair - Q1 result 27 April 2012
Operational EBIT build-up in Q1 2012 (IFRS)
-43.1
-25.0-34.9
9.52.3 1.9 -1.8 -3.2
-4.4
-34.9
43.5
12.1
3.3
-10.3
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Q1 2011 EBIT
Traffic revenue
Other revenue
Other expenses
Cargo revenue
Expenses for
tour operators
Staff costs
Other rents
Traffic charges
Groundhandling
andcatering
expenses
Maintenance Fuel Q1 2012 EBIT
* Operational EBIT
Finnair - Q1 result 27 April 2012 23
Change in operating costs Q1 2012
-13.6%
6.9%
-5.7%
10.1%
6.1%
-1.6%
26.2%
1.4%
7.0%
Other expenses
Depreciation and lease payment for aircraft
Expenses for tour operations
Ground handling and catering expenses
Traffic charges
Staff costs
Fuel
Operating expenses excl. Fuel
Total operating expenses
24Finnair - Q1 result 27 April 2012
Jet fuel, spot price development
25Finnair - Q1 result 27 April 2012
Fuel cost development Q1 2012 vs. Q1 2011
26
*Incl. Hedging profit of 17 Mill. EUR
133
168*
9
237 -5
0
50
100
150
200
Q1/2011 Volume Price Currency HedgingDeviation
Q1/2012
Mill. EUR
Finnair - Q1 result 27 April 2012
Hedging positions 31 March 2012
0%
20%
40%
60%
80%
100%hedge ratioupperlower
27Finnair - Q1 result 27 April 2012
Traffic Performance Q1/2012 vs. Q1/2011
• Asia traffic share 47 % of total ASK
28
ASK -10.7% ASK 5.7% ASK 8.3%RPK -5.4% RPK 22.2% RPK 11.5%PLF% 4.4%-p PLF% 9.4%-p PLF% 2.2%-pTraffic revenue * -6.4% Traffic revenue * 18.5% Traffic revenue * 16.5%
ASK -2.6% ASK -5.6% ASK 3.9%RPK -5.5% RPK 13.0% RPK 9.1%PLF% -2.7%-p PLF% 10.6%-p PLF% 3.6%-pTraffic revenue * 1.6% Traffic revenue * -6.1% Traffic revenue * 11.4%
ATK 11.0%RTK 24.6%CLF% 7.8%-p
* passenger revenue
Traffic revenue 21.7%
Cargo
Europe North Atlantic
Leisure traffic Domestic
Asia
Total
Finnair - Q1 result 27 April 2012
Thank you!
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