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Cost-cutting measures and Asian traffic dampened Finnair’s loss

On 10.29.09, In Finnair, by admin

The Finnair Group’s turnover fell by 22 per cent in July-September. The main reasons for this were a fall in demand and the average price. The operational result was a loss of EUR 36.4 million, because costs declined less than the
turnover, by 15 per cent. The loss was dampened, however, compared with previous quarters.

“The third quarter result was in line with our expectations, even though it naturally does not in any way correspond with our goals. Aircraft are flying with fairly reasonable passenger load factors, but a steep fall in the average price is eroding profitability,” says Finnair’s President & CEO Jukka Heinonen.

In July-September, Finnair carried two million passengers. Passenger traffic demand fell by 11 per cent and capacity was cut to the same extent. The capacity cuts kept aircraft load factors at the previous year’s level, 80 per cent. The amount of cargo carried fell by more than 8 per cent.

“In the economic downturn, Finnair’s Asian strategy has proved to be particularly important. The domestic market suffered from weak demand and price levels. It is satisfying to note that new corporate agreements in other markets have offset to some extent the decline in domestic demand. Europe-Asia traffic already accounts for over 50 per cent of Finnair’s scheduled traffic revenue.”

Finnair has under way an efficiency programme totalling 200 million euros, the impact of which on the third quarter result was around 30 million euros. Cumulatively, the cost-cutting programs have yielded around 70 million euros in January-September. A savings target of 120 million euros is allocated to personnel costs.

“The weakening of profitability has been slowed through energetic cost-cutting measures. Stabilisation agreements covering Technical Services, Cabin Service and Catering have played a key role. We have adjusted to falling demand by cutting capacity. Adjustment to the fall in price level, in contrast, has been less effective,” says Hienonen.

Finnair improved financial solidity through a 120 million euro hybrid bond issued in September. Furthermore, Finnair has at its disposal sources of finance with a total value of 700 million euros, which will safeguard the fleet
modernisation currently under way.

“Finnair’s prospects for recovering from the economic downturn are better than those of many of its competitors, but a small domestic market requires the purposeful implementation of the company’s chosen Europe-Asia strategy. The cost level must be lowered to correspond with the price level available in an internationally competitive market.”

Finnair Plc
Communications