Finnair Oyj - Company Announcement

Finnair plans to take alternative measures to reach cost savings ‒ if other solutions not found,  estimated personnel impacts 680 employees

  · Cuts planned in support functions
  · Wider use of outsourcing an option if insufficient results in flight crew
negotiations
Finnair Plc Stock Exchange Release 27 March 2014 at 13:00 EET

CEO Pekka Vauramo: We still hope to achieve results in negotiations, outsourcing
and redundancies are always a secondary option

Finnair is starting today employee consultations with its personnel. The
consultations concern employees working in administrative and support functions
as well as cabin attendants. The measures are part of the savings program
started in 2011, which aims at breaking Finnair's loss-making cycle. The company
still hopes that by achieving cost reductions in ongoing negotiations the
redundancies could be avoided for the most part.

Support functions rationalised

Finnair plans to rationalise its administration and support functions, which
could lead to a reduction of approximately 140 employees at this stage. Possible
need for further reduction in these functions will be estimated during the rest
of the year. The reductions would concern some operative, commercial and common
corporate support functions that employ altogether some 800 persons in various
tasks.

“We must carefully consider our focus in the support functions,” says Pekka
Vauramo. “Can we be more efficient or are there tasks that can no longer be
maintained? We believe that by focusing strictly on the essential and by
improving our productivity we can achieve considerable savings.”

No progress in the flight crew negotiations, alternative measures planned

At the end of last year Finnair concluded new collective labour agreements in
line with the Finnish Employment and Growth Pact. At the same time, the parties
agreed on cost reduction negotiations that would be concluded with cabin
attendants by the end of April 2014 and with pilots by mid-June. When Finnair
announced its loss-making results for 2013, the company stated that it must
assess other options for reaching its targets, in case the necessary agreements
on cost reductions are not reached through negotiations.

Although the company's priority and preference is to reach agreement with
personnel at the negotiation table, it is now obliged to draft optional plans to
increase outsourcing of flight crew. Finnair now begins employee consultations
with personnel representatives on the topic.

“Loss-making Finnair, whose financial situation has further weakened during the
past years, can no longer wait,” Vauramo emphasises. “The situation calls for
quick action to restore our profitability. We have attempted to negotiate on
cost reductions in personnel-related costs ever since we initiated the cost
reduction program in 2011. We still hope to reach in the ongoing negotiations
the kind of result that would allow us to continue flying with our current crew.
The outsourcing of our flight crew is clearly a secondary option for us. We
would like to continue to employ our current employees and create new jobs at
Finnair."

“However, this is not possible with the current terms, since the present-day
wage level is not equivalent to the market level. We want all Finnair employees
to know the options we have at hand. Already during the Finnish Employment and
Growth Pact negotiations, we stated that without a thorough reassessment of our
CLAs Finnair has no employment or growth prospects. Decisions on Finnair's
future direction are made during the coming weeks at the savings negotiation
tables and in the employee consultations covering the alternative options,”
Vauramo adds.

Wider use of outsourcing in the cabin service

Finnair is considering wider use of outsourcing in the cabin service of its long
-haul and short-haul traffic. In the initial stage, the company plans to
outsource the cabin personnel of three long-haul routes at maximum during this
year. In the next stage, Finnair would outsource the cabin service of more than
10 routes.

Finnair has in total 1500 cabin attendants in Finland. Due to the planned
outsourcing the reduction of approximately 540 cabin attendants would be
required.

Separate from the employee consultation process, Finnair is examining the
possibility to set up a subsidiary that would produce cabin services and sell
them to Finnair Plc.

In addition to the flight crew, Finnair concluded agreements in line with the
Finnish Employment and Growth Pact also with IAU and PRO and is in discussions
about salary and structural solutions with their local employee groups. Slight
progress has been made especially in local negotiations in Technical Operations.

The employee consultations now beginning do not apply to pilots, because the
pilot's savings negotiations deadline is later than others in June. Negotiations
with pilots include significant changes to CLAs and the decisions are made later
in spring.

In October 2012 Finnair started a 60 million euro additional cost savings
program mainly in personnel-related costs. Finnair aims to save 18 million euros
in cabin crew costs, 17 million euros in pilot personnel costs, and 8 million
euros in IAU personnel costs. The savings target for other employee groups is
12million euros. Finnair's Board of Directors has also reduced the variable part
of the top management's total remuneration as well as other benefits. In August
2013 Finnair announced that it had reached the targets of the 140 million euro
cost savings program.
FINNAIR PLC
Further information:
Finnair communications, 358 9 818 4020, comms(a)finnair.com

Distribution:
NASDAQ OMX Helsinki
Principal media