Finnair Group Half-year Report 1 January

COVID-19 grounded Finnair’s passenger operations to a near halt and revenue was mainly driven by cargo-only operations, cash position and equity were restored to pre-pandemic level

April–June 2020

Earnings per share were -0.25 euros (0.04).
Revenue decreased by 91.3% to 68.6 million euros (789.1)*.
Fuel costs decreased by 147.3 million euros (-81.6%) due to the COVID-19-related decline in capacity although it was partly netted by the impact of changes in fuel prices**.
The comparable operating result was -174.3 million euros (47.2). The operating result was -171.2 million euros (47.9).
Financial net expenses were 46.0 million euros (19.7) and they increased significantly, with c. 29 million euros of the increase related to jet fuel and foreign exchange hedging that was reclassified from other comprehensive income.
Net cash flow from operating activities was -463.7 million euros (176.8) and net cash flow from investing activities was 262.1 million euros (-147.0).***
The number of passengers decreased by 97.5% to 0.1 million (3.9).
Available seat kilometres (ASK) decreased by 97.2%.
Passenger load factor (PLF) was 33.1% (-49.4 points).

January–June 2020

Earnings per share were -0.46 euros (-0.02).
Revenue decreased by 56.8% to 629.8 million euros (1,457.3)*.
Fuel costs decreased by 148.6 million euros (-45.6%) due to the COVID-19-related decline in capacity although it was partly netted by the impact of changes in fuel prices**.
The comparable operating result was -265.4 million euros (31.0). The operating result was -266.8 million euros (30.3).
Financial net expenses were 125.7 million euros (40.3) and they increased significantly, with c. 84 million euros of the increase related to jet fuel and foreign exchange hedging that was reclassified from other comprehensive income.
Net cash flow from operating activities was -597.2 million euros (325.0) and net cash flow from investing activities was 194.8 million euros (-217.2).***
The number of passengers decreased by 61.0% to 2.8 million (7.1).
Available seat kilometres (ASK) decreased by 56.4%.
Passenger load factor (PLF) was 71.3% (-9.3 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 322.1 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 371.3 million euros. These redemptions are part of the Group’s liquidity management.

Outlook

Guidance issued on 29 April 2020:

Finnair's current assumption is that it will operate the current minimum network throughout Q2 due to the coronavirus situation. At the same time, the company estimates that the recovery of air traffic will begin in stages from the beginning of July 2020. However, the pace of recovery cannot be assessed at this stage, leaving the outlook for the second half of 2020 unclear. Finnair is preparing for the future with different scenarios to have the ability to quickly adapt its capacity to changing demands.

Finnair estimates that with the current minimum network, its comparable operating result will be a daily loss of approximately 2 million euros throughout the second quarter, despite cost adjustments.

Due to the current situation, Finnair's revenue will decrease significantly in 2020 compared to 2019. The comparable operating loss will be significant in the financial year 2020 as the company announced in its profit warning on 16 March 2020. In addition, Finnair's capacity will decrease significantly this year compared to 2019. Due to these factors, Finnair will also update its financial targets for the strategy period.

Finnair updates its outlook and guidance in connection with the Q2 interim report.

New guidance on 24 July 2020:

In Q3, Finnair gradually increases its capacity and will operate c. 25% of flights in July compared to the same period in 2019. Based on the current assumption, the share of flights operated increases to c. 50% in September. There are uncertainties relating to COVID-19 development and lifting of travel restrictions. As a result, the outlook remains unclear and the company does not provide revenue guidance for Q3.

As ramp-up is an investment, and there are costs associated with it, and Finnair will be running with clearly reduced capacity, the comparable operating loss in Q3 will be of a similar magnitude than in Q2.

Further, the company reiterates its previous guidance and states that the revenue will decrease significantly in 2020 compared to 2019 and that the comparable operating loss will be significant in the financial year 2020. In addition, Finnair's capacity will decrease significantly this year compared to 2019.

Finnair updates its outlook and guidance in connection with the Q3 interim report.

CEO Topi Manner:

Finnair’s second quarter was characterised by a single factor: the COVID-19 pandemic. As we anticipated, it resulted in our capacity dropping to three per cent, as during the second quarter we only maintained flight connections that are critical for Finland. This was also directly reflected in the number of passengers, revenue and result. During the quarter, our comparable operating loss was approximately 2 million euros per day, in line with the guidance we gave in connection with our Q1 results.

However, the review period also included many glimmers of hope. The demand for cargo-only flights remained high throughout the quarter and we flew 602 one-way cargo flights, mainly between Finland and Asia. Cargo exceptionally accounted for over 70% of our revenue for the quarter, and its profitability remained at a good level. The cargo traffic also had a profound social impact as the cargo we transported included personal protective equipment used in managing the pandemic and in ensuring security of supply. Otherwise our result reflected a near-complete halt to our traffic.

I am also satisfied with the measures we took to raise debt and equity during the quarter. First and foremost, the successfully executed oversubscribed rights issue of 500 million euros was vital for our future. Our strong ownership structure remained essentially unchanged in the rights issue and the Finnish Government retained its position as a majority shareholder. The support by our shareholders forms a solid basis for rebuilding and implementing our strategy. I would like to offer warm thanks to all our old and new shareholders, who participated in the rights issue: your trust means a lot to Finnair and its employees.

Thanks to the timely and comprehensive financing measures, our cash position remained strong at approximately 970 million euros after we received the last proceeds from the rights issue in early July. At the same time, our balance sheet is healthy as the equity ratio rose to nearly 28%.

We have also continued implementing our cost reduction programme. As communicated in May, we target a permanent annual cost reduction of nearly 80 million euros from the beginning of 2022, compared to 2019. We seek savings from, among others, real estate costs, aircraft leases, salary and incentive structures, sales and distribution costs as well as IT and administrative costs. In line with our strategy, we also continue the streamlining, digitalisation and automation of our operations. The first results from savings measures have been encouraging. We are also adapting our volume-driven costs to demand, and in this for example the flexible Finnish furlough practices have been of assistance.

Between February and June, we have paid over 270 million euros to customers in refunds for flights cancelled due to the COVID-19 situation. In four months, we have received as many refund requests as we normally get in three years. Currently, we have processed about two-thirds of the requests. We estimate that we will still pay approximately 100 million euros in refunds to customers. The situation has been totally exceptional and has resulted in delays in refund handling, but we are doing everything we can to minimise the delays. We have made considerable additions to the personnel processing the requests and have also developed robots to speed up the process. I want to apologise to our customers for the delays and thank them sincerely for their patience. We will ensure that all customers get their refunds as soon as possible.

In Europe and in Asia, countries are slowly opening their borders and lifting travel restrictions. Finnair has started to operate a more meaningful network of routes and we will keep adding flights gradually and flexibly according to demand as the year progresses depending, however, on the pandemic development and lifting of travel restrictions.

The health and safety of our customers and employees are important to us and we want to make sure that people can fly confidently. For this reason, we have taken into use several measures that increase safety, such as intensified cleaning of aircraft, new practices for boarding and disembarking the aircraft as well as mandatory face masks on flights.

I hope to see you on our flights soon and, with my thanks, I wish you a great summer.

Financial Reporting in 2020

The publication dates of Finnair’s financial reports in 2020 are the following:

Interim Report for January–September 2020 on Wednesday 28 October 2020

This text is a summary of Finnair's Half-year Report January-June 2020. The full report is available as an attachment to this report.

FINNAIR PLC
Board of Directors

Briefings

Finnair will hold a results press conference (in Finnish) on 24 July 2020 at 11:00 a.m. via a live webcast: https://finnairgroup.videosync.fi/2020-0724-press

An English-language telephone conference and webcast will begin at 1:00 p.m. Finnish time. The conference may be attended by dialling your local access number +358 (0)9 8171 0310 (Finland), 08 5664 2651 (Sweden), 033 3300 0804 (UK) or +44 (0)33 3300 0804 (all other countries). The confirmation code is 16413218#. To join the live webcast, please register at: https://finnairgroup.videosync.fi/2020-q2