Finnair Reports Third Quarter Loss

Thanks to a fall in demand and a lower average ticket price, the Finnair Group's turnover fell by 22% in the third quarter, between July and September 2009. The operational result was a loss of EUR 36.4 million.

“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,” said Finnair's President & CEO Jukka Heinonen.

Over the quarter, Finnair carried two million passengers. Passenger traffic demand fell by 11% and capacity was cut to the same extent. The capacity cuts kept aircraft load factors at the previous year's level, 80%. The amount of cargo carried fell by more than 8%.

“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% 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,” Hienonen said.

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,” added Hienonen.

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