Finnair Group Half-year Report 1 January

Q2 revenue increased by 10.4 per cent and comparable operating profit was 47.2 million euros

Quarterly and full-year figures for 2018 have been restated to reflect the adoption of the IFRS 16 standard, changesin accounting principles relating to aircraft components and the changes in the presentation of profit and loss, balance sheet and cash flow statements. The restated figures were published on 21 March 2019. More information on the restatement is available in Note 20 to the Interim Report.

April–June 2019

Revenue increased by 10.4% to 793.0 million euros (718.2).
Unit revenue (RASK) decreased by 3.8%. Unit revenue at constant currency decreased by 3.7%.
Unit cost (CASK) decreased by 1.4%. Unit cost at constant currency excluding fuel decreased by 2.9%.
Fuel costs increased by 35.2 million euros (+24.2%) of which the impact of fuel price** was 13 million euros.
Some exceptional increase in maintenance costs were booked for the quarter.
Comparable operating result was 47.2 million euros (59.1). Operating result was 47.9 million euros (50.8).
Net cash flow from operating activities was 176.8 million euros (233.1), and net cash flow from investing activities was -147.0 million euros (-34.6).**
Earnings per share were 0.22 euros (-0.15).
Number of passengers increased by 13.1 per cent to 3.9 million (3.5).
Available seat kilometres (ASK) grew by 14.8%.
Passenger load factor (PLF) was 82.5% (-0.1 points).

January–June 2019

Revenue increased by 7.8% to 1,466.0 million euros (1,359.3).
Unit revenue (RASK) decreased by 4.3%. Unit revenue at constant currency decreased by 4.4%.
Unit cost (CASK) decreased by 1.0%. Unit cost at constant currency excluding fuel decreased by 2.9%.
Fuel costs increased by 53,0 million euros (+19.4%) of which the impact of fuel price** was 19 million euros.
Some exceptional increase in maintenance costs were booked for the quarter.
Comparable operating result was 31.0 million euros (73.7). Operating result was 30.3 million euros (67.7).
Net cash flow from operating activities was 325.0 million euros (341.1), and net cash flow from investing activities was -217.2 million euros (-91.1).**
Earnings per share were -0.11 euros (-0.07).
Number of passengers increased by 9.0 per cent to 7.1 million (6.5).
Available seat kilometres (ASK) grew by 12.7%.
Passenger load factor (PLF) was 80.5% (-2.2 points).

Unless otherwise stated, comparisons and figures in parentheses refer to the comparison period, i.e. the same period last year.

** Fuel price including impact of currencies and hedging.

*** In Q2, net cash flow from investing activities includes 2.9 million euros of redemptions in money market funds or other financial assets maturing after more than three months. In H1, these decreased in net terms by 55.5 million euros. These redemptions are part of the Group’s liquidity management.

Outlook

Guidance issued on 24 April 2019:

Global airline traffic is expected to continue growing in 2019. Finnair expects increased competition as capacity is added, particularly on routes linking Europe with Asia as well as in short-haul traffic.

The slowdown in the economy of Finnair’s key markets and the continued uncertainties surrounding global trade, including from Brexit, could impact the demand for air travel and cargo.

Finnair plans to increase its capacity by approximately 10 per cent in 2019, down from its 14.8 per cent capacity growth in 2018. This growth is mainly focused on the Asian market. Revenue is expected to grow at a somewhat slower pace than capacity in 2019.

In line with its disclosure policy, Finnair will issue guidance on its full-year comparable operating result as part of its half-year report in July.

New guidance on 17 July 2019:

Global airline traffic is expected to continue growing in the latter half of 2019. However, the operating environment is expected to remain volatile also in the second half of the year. The slowdown in the economies of Finnair’s key markets and the continued uncertainties surrounding global trade, including the US-China trade talks and Brexit, could impact the demand for air travel and for cargo.

Finnair raises its capacity forecast for 2019 owing mainly to its new service to Beijing Daxing International Airport. Finnair estimates that capacity growth in 2019 will be between 11-12 per cent. Revenue is expected to grow at a somewhat slower pace than capacity in 2019.

While the current outlook for Finnair’s seasonally strongest third quarter remains robust, we have started to see increased uncertainty especially in cargo demand. Finnair estimates that its comparable operating result will be between 4.5-6.0% of revenue in 2019, assuming no material changes in fuel prices and exchange rates.

CEO Topi Manner:

Despite the volatile operating environment in Q2, the number of passengers carried rose to a new Q2 record of 3.9 million passengers, and our market share strengthened in both Asian and European traffic.

Global uncertainties, such as Brexit and the US-China trade talks, and the gradual slowdown in the economies of Finnair’s key markets, were reflected in our Q2 performance. At the same time, capacity reductions in European traffic, especially on some Nordic routes, had a minor beneficial effect on the competitive situation.

Overall, our passenger traffic performed well, with European traffic growing well in line with our expectations. Cargo and travel services, on the other hand, were suffering from a more difficult market environment.

We continued to grow: Our revenue grew by 10.4 percent to 793.0 million euros driven by passenger revenue. Profit developed more moderately and was impacted especially by a 13 million euro increase in fuel price[1] and an exceptional increase in maintenance costs. Our comparable operating result was EUR 47.2 million in Q2.

During the review period, we continued to invest in our customer experience: in June, we opened a new Platinum Wing lounge in Helsinki-Vantaa airport, which has been received enthusiastically by our customers. The expansion of the Business Class lounge will be completed in early autumn. We've made it easier for the customer to buy tickets and services via the renewed Finnair.com website, which has already been opened in over 30 markets. We also completed the installation of wireless internet access for the Airbus narrow-body aircraft. In the annual Skytrax evaluation, Finnair was recognized as the ‘Best Airline in Northern Europe’ for the tenth consecutive year, and for that I want to express my warmest thanks to our passengers and to our personnel, who have paved the way for this recognition. Understanding and nurturing a strong relationship between customer and employee experience is in the core of Finnair’s strategy.

Sustainability is also one of the cornerstones of our strategy. During Q2 we made progress towards our goals of halving the use of disposable plastic on our flights by the end of 2022 and reducing waste in general: we renewed the packaging of products sold on European flights, reduced the amount of plastic from travel packages and started recycling of bright PET plastic from our return flights to Helsinki. We are also constantly looking for new ways to improve fuel efficiency and reduce carbon emissions from our flying.

Sustainable, profitable growth is our future goal. We will increase capacity in our key markets, either to implement our long-term Asian growth strategy or to exploit short-term tactical growth opportunities. In Asian traffic this can be seen, for example, in the openings of new connections in the second half of the year, and in Europe as route optimization. As the first airline, Finnair will open a direct flight from Europe to Busan, the second largest city in South Korea in the summer of 2020, and in early November 2019 we will open a new connection to Beijing's new Daxing International Airport in addition to the current connection. After that we will operate 10 flights per week to Beijing. In addition, we are extending the summer season route to year-round in Guangzhou, the home hub of our new codeshare partner China Southern.

In the foreseeable, more challenging operating environment, we will pay increasing attention to operational efficiency, including cross-unit processes and resource optimisation between traffic planning and flight operations, and putting further focus on reliability. Furthermore, we will increase productivity by simplifying and automating processes, such as customer compensations, and by utilising digitalisation in distribution and customer service.

Fuel price including impact of currencies and hedging.

Financial Reporting in 2019

The publication dates of Finnair’s financial reports in 2019 are the following:

Interim Report 1 January – 30 September 2019: 22 October 2019
FINNAIR PLC
Board of Directors