Finnair showed a loss for July-September

The aviation industry is undergoing a worldwide crisis, and this is also evident in Finnair's interim results. The operating loss for the company during July-September (inclusive) amounted to ten million euros. Turnover fell by 4.4 per cent to 390.8 million euros. The operating loss excluding revenues from the disposal of capital assets, i.e. the sale of equipment and fixtures, amounted to about 20 million euros.

"The dramatic fall-off in demand for air travel has forced the entire industry to make adjustments," commented CEO Keijo Suila. "We are now fighting for survival, and not everyone will make it. We face a tough winter ahead and our earnings ability in the New Year will continue to be poor," he said.

The decline in profitability stems in the main from a weakening in demand for air travel generally. In particular, demand has fallen in business class travel, which has resulted in a considerable decrease in earnings. It is expected that the operating result for the Finnair Group for the whole of the 2001 financial year will remain in deficit.

"Judging by advance demand, however, it seems that the bottom of the chasm has finally been reached and it is my cautious estimation that the level of demand will normalize towards the end of next year. The current savings measures and those already agreed upon as well as the constructive co-operation with the different unions give us a realistic possibility of making it through the difficult times ahead. Air travel is a growing industry and Finnair will claim its ticket to the future with a sound economy and superior quality," Mr Suila declared.

Operating costs increased during July-September Personnel costs increased by more than 16 million euros in consequence of an increase in Finnair's contributions to the pension fund to cover pension security for the staff. This increase resulted in the main from the significantly poorer performance than the previous year of the pension fund's investment operations, which tracked the decline in share prices on the stock market.

Personnel costs make up the biggest single item of operating expenses, representing almost a third of all operating costs. A further third of operating costs come in the form of fuel costs and traffic fees, ground handling charges and catering costs. Operating costs together totalled 413.6 million euros. The increase from the previous year was 6.8 per cent .

Savings without compromising safety or quality Our objective is to achieve annual savings in operating costs of 115 million euros. Of this we shall endeavour to save almost half from personnel costs. The company will seek savings by postponing capital spending and other purchases, by reducing the number of workers on fixed-term contracts, by freezing salaries and by halting recruitment.

Finnair has agreed on savings measures with five trade unions by which we shall be able to achieve savings in personnel costs in the main without having to lay off staff.

Finnair reduced and reorganized its route network in the wake of weaker demand and changes which have occurred in the industry. Demand for American traffic collapsed in consequence of the terrorist attacks in the United States, as a result of which Finnair cut back its Helsinki-New York route by two flights a week and transferred its freed-up capacity to its Bangkok and Canary Islands routes.

Passenger numbers and the passenger utilization rate for Asian traffic increased significantly during January-September 2001 as a result of the strategic reorganization of the company's long haul routes.

Despite the events of September, volume trends during the third quarter were still positive overall.

Flights between Helsinki and Gatwick were terminated as part of this readjustment. Capacity reductions were also introduced for other European routes as well as for domestic traffic. There was an overall reduction in capacity of 5.5 per cent compared with the previous winter.

We shall continue to implement our Far Eastern strategy with determination, by introducing flights to Hong Kong and by increasing the number of flights to existing Asian destinations. As part of our Far Eastern strategy, Finnair has begun flying between Helsinki and Skavsta, to the south of Stockholm. In addition to handling local traffic, the new route opens up a fast connection to Finnair's Far Eastern destinations for the business community south of Stockholm.

Finnair has now been Europe's most punctual airline for the third year. The standard of service is also among the highest in Europe.

Early 2001 performance evened out the result The Group's profit for January-September 2001 after financial items and excluding revenues from the sale of capital assets amounted to 8.7 million euros, compared to the figure of 56.1 million euros a year before. Turnover increased by 2.4 per cent to 1 251.2 million euros. Operating costs increased by 5.6 per cent. Profit before taxes amounted to 29.5 million euros, which is 90 million euros less than a year previously.

Finnair has begun negotiations with manufacturers and leasing companies concerning the terms and timing arrangements for aircraft due for delivery in the next few years. The purpose is to find solutions which will enable the company to achieve its basic objective of reducing the number of aircraft types in its fleet whilst at the same time improving cost-efficiency and the quality of service. Finnair is not planning to convert existing aircraft purchase options into firm orders.

At the end of September, the Group held liquid cash reserves of 146 million euros in addition to a total of 300 million euros in unused loan guarantees.

Furthermore, Finnair owns aircraft to which no financial obligations are attached, including all four wide-bodied MD-11s in its fleet and four Airbus A320 type aircraft. The market value of these eight aeroplanes is estimated to be about 280 million euros.