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Finnair Believes in a Profitable Result

21 May 2002
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The financial trend that produced negative figures at the end of 2001 continued into the beginning of 2002. The operational result for the Finnair Group for the first quarter was a loss of 5.1 million euros. The company's management, however, believes that a turn for the better has already taken place.

"If the current development continues, we have good reason to expect a positive operational result for this financial year," Finnair's President and CEO, Mr Keijo Suila estimates.

Turnover was 390 million euros, 7.4 per cent lower than for a year before. However, signs of a recovery in demand began to appear before the end of the quarter. 

"One of the toughest times for the industry is now behind us. At Finnair the situation is well in hand, our strategy is working and we can look ahead with confidence," Mr. Suila said. 

Asian Traffic Is Strong

The general economic trend is expected to strengthen, especially at the end of the year. The successful start-up of the company's new Asian strategy has also strengthened prospects for European traffic.

"The gradual recovery in demand is continuing and in our main markets a turn for the better can be seen in both business travel as well as in air cargo. I am particularly delighted with the vigorous takeoff of our Asian expansion," Mr Suila stated. 

During 2002 the company will increase capacity in its Asian scheduled passenger traffic by a third, in line with its new long haul strategy. It is thanks to this new long distance strategy that passenger numbers for Asian scheduled traffic increased by 36.0 per cent at the beginning of the year, whilst the passenger load factor rose to 83.7 per cent.

Adjustment Improved Load Factors

The passenger load factor for North American traffic improved by 13.1 percentage points, as a result of a cutback in capacity. Passenger load factors and volume trends were weakest in domestic and leisure traffic.

"The objective is not to increase the passenger volumes on the expense of a healthy yield. By focusing on higher passenger load factors and implementing the cost-cutting programme, the company expects to improve the profitability and safeguard its financial health," said Mr Suila. 

Thanks to the adjustment measures introduced last autumn, the passenger load factor improved during January-March (inclusive) by almost four percentage points, to 72.6 per cent. The overall capacity for scheduled traffic, counted as passenger kilometres, will be reduced during 2002 by nearly three per cent compared with the previous year. The biggest cuts will affect European, North Atlantic and domestic traffic. Capacity will be reduced for European traffic by about 11 per cent this year. Leisure traffic will be cut back by almost 8 per cent. 

Demand for business class travel still continued weak during the beginning of the  year, but advance bookings indicate, that a recovery can already be expected. The decline in passenger numbers for business class travel on international scheduled flights amounted to 18.7 per cent, but there was a rise in tourist class of 7.6 per cent. The proportion of business class travel on  international scheduled flights fell by 5.4 percentage points to 23.7 per cent. 

Leisure traffic capacity was reduced at the beginning of the year by 18.4 per cent compared with a year previously. This lowered turnover for leisure traffic by almost 15 per cent. Cargo and mail volumes declined by nearly per  cent, butFinnair Cargo's turnover fell by only 1.7 per cent. A cutback of almost 40 per cent was made in the use of freight capacity hired from outside the Group. 

Combined turnover for travel agency units owned by Finnair rose by four per cent, and their operating profit came to more than half a million euro. 

Costs Have Remained Under Control

Operating costs came to about five per cent less than a year previously. As a result of the lower level of operations and the cost-cutting measures, the costs for ground handling and catering fell by more than 20 per cent. Fuel costs were a fifth lower, the price of oil having turned downwards and with the reduction in flying hours resulting from the adjustments. Personnel costs increased by less than a  per cent. There were almost ten and a half thousand people employed by the company, which was about 270 fewer than at the beginning of 2001.

Last autumn, Finnair set in motion a 115 million euro cost cutting programme. Almost half of the savings objectives involved staff costs.  "The cost-cutting programme is proceeding as planned. It's implementation is one of the essential requirements for producing a positive result," Mr Suila said.

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