2012-10-26 08:30:03 CEST
2012-10-26 08:30:13 CEST
REGULATED INFORMATION
Finnair Oyj - Interim report (Q1 and Q3)
Finnair Group interim report January 1 – September 30, 2012
In July-September, turnover grew by 7.1 per cent year-on-year to 650.3 million
euros and the operational result increased to 48.9 million euros
Finnair Plc. interim report 26 October 2012 at 09:30
Key figures 7-9 7-9 Change 1-9 1-9 Change 2011
2012 2011 % 2012 2011 %
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Turnover and result
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Turnover, EUR million 650.3 607.2 7.1 1,836. 1,680. 9.3 2,257.
5 3 7
Operational result, 48.9 27.6 77.2 38.6 -29.3 >20 -60.9
EBIT, EUR million 0
Operational result, % of 7.5 4.5 3.0%-p 2.1 -1.8 3.9%-p -2.7
turnover
Operating result, EBIT, 71.1 10.6 >20 32.8 -57.7 156.8 -87.8
EUR million 0
EBITDAR, EUR million 97.8 75.8 29.0 186.9 113.2 65.1 139.6
Result before taxes, EUR 67.3 3.1 >20 15.6 -73.3 121.3 -111.5
million 0
Net result, EUR million 50.8 1.9 >20 10.6 -54.9 119.3 -87.5
0
Balance sheet and cash
flow
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Equity ratio, % 33.3 33.1 0.2%-p 32.6
Gearing, % 25.9 41.9 -16.0% 43.3 -p
Adjusted gearing, % 90.1 101.4 -11.3% 108.4
-p
Capital expenditure, 7.4 121.0 -93.9 17.7 182.8 -90.3 203.9
CAPEX, EUR million
Return on capital 1.0 -3.4 4.4%-p -5.2
employed, ROCE, 12
months, %
Return on equity, ROE, -1.1 -7.5 6.4%-p -10.9
12 months rolling, %
Net cash flow from 44.5 -1.2 >20 136.8 59.2 131.1 50.8
operating activities 0
Share
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Share price at end of 2.07 2.94 -29.6 2.07 2.94 -29.6 2.30
quarter, EUR
Earnings per share 0.43 0.00 0.08 -0.48 116.7 -0.75
(EPS), EUR
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Traffic data
unit costs and revenue
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Passengers, 1,000 2,361 2,174 8.6 6,693 6,100 9.7 8,013
Available seat 7,810 7,553 3.4 22,799 22,057 3.4 29,345
kilometres (ASK),
million
Revenue passenger 6,352 5,849 8.6 17,871 16,305 9.6 21,498
kilometres (RPK),
million
Passenger load factor 81.3 77.4 3.9%-p 78.4 73.9 4.5%-p 73.3
(PLF), %
Unit revenue per
available seat
kilometre,
RASK, cents/ASK 6.93 6.43 7.8 6.52 6.00 8.7 6.03
Unit revenue per revenue
passenger kilometre,
yield, cents/RPK 7.54 7.38 2.3 7.33 7.17 2.2 7.24
Unit cost per available
seat kilometre,
(CASK), cents/ASK 6.60 6.22 6.1 6.58 6.32 4.2 6.43
CASK excluding fuel, 4.43 4.48 -1.1 4.51 4.59 -1.9 4.67
cents/ASK
Available tonne 1,187 1,196 -0.7 3,511 3,420 2.7 4,571
kilometres (ATK),
million
Revenue tonne kilometres 801 769 4.1 2,295 2,125 8.0 2,823
(RTK), million
Cargo and mail, tonnes 37,338 39,286 -5.0 112,08 107,85 3.9 145,88
4 2 3
Cargo traffic unit
revenue per
revenue tonne kilometre, 24.41 26.34 -7.3 25.12 26.66 -5.8 26.50
cents/RTK
Overall load factor, % 67.5 64.4 3.2%-p 65.4 62.1 3.2%-p 61.8
Flights, number 17,845 19,767 -9.7 54,011 60,631 -10.9 78,916
Personnel
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Average number of 6,966 7,514 -7.3 7,467
employees
* Operational result: Operating result (EBIT), excluding non-recurring items,
capital gains and changes in the fair value of derivatives and in the value of
foreign currency denominated fleet maintenance reserves
CEO Mika Vehviläinen:"In the third quarter, which is seasonally Finnair's strongest of the year,
our operational result grew to 48.9 million euros. This is the best quarterly
result in Finnair's history. This strong result is a credit to the entire
Finnair team, as we have showed great determination to improve our
profitability and pave the way for continued success in the future.
We also managed to increase our turnover, achieve a high load factor, improve
unit revenue and make significant progress in implementing our cost reduction
program. The improvement in the company's result is particularly positive
considering that our most significant cost item, fuel, increased by some 25 per
cent year-on-year. Our more aggressive pricing and the continued optimisation
of our route network have resulted in improved load factors compared to 2011.
The challenging market conditions have also reduced the intensity of
competition on certain routes, which has benefited Finnair somewhat.
We have made solid progress in our 140 million euro structural change and cost
reduction program, as we have already achieved by the end of the third quarter
our target to reduce costs by 80 million euros by the end of 2012. Finnair
concluded a number of structural change initiatives in the third quarter, and
the transfer of our Embraer 190 fleet to be operated by Flybe proceeded
according to plan.
While we achieved a profitable result in the most recent quarter, Finnair is
still a long way from reaching its long-term profit target of 6 per cent
operating profit margin. We will face substantial investments in our fleet in
the coming years and must continue to improve our profitability to finance
these investments. With this in mind, we have today published a new cost
reduction target: we aim to achieve a further permanent reduction in costs of
60 million euros by the end of 2014. The new cost reduction program complements
the previously announced program of 140 million euros.
The fourth quarter is traditionally weaker than the third in our business, and
the continued uncertainty in the global economy makes the visibility for the
rest of the year weak, particularly with regard to the demand for corporate
travel. Due to the prevailing uncertainty, we have taken a conservative
approach to increasing our capacity and are flexible to make further
adjustments to our operations if necessary. Our long-term strategy remains
unchanged: we believe the growing demand for Asian traffic will continue to
create new business opportunities for Finnair.
Despite the uncertainty over the fourth quarter, we are confident that we will
post a profitable operational result for the full year for the first time since
2008."
Business environment
The global airline industry is undergoing a structural change typified by
market liberalisation, increasing competition, overcapacity, consolidation,
alliances and specialisation. The intense competition is reflected in the major
structural change and cost reduction programs implemented by several European
airlines, as well as bankruptcies. The capacity growth in the market is now
considerably more controlled than previously, and various alliance and
partnership arrangements are increasing, particularly in international
long-haul traffic. Finnair's goal is to take advantage of the opportunities
presented by the changes in its industry and strengthen its position in traffic
between Asia and Europe as well as within Europe.
In the third quarter, the price of the largest individual cost item for
airlines - jet fuel - remained high, creating significant cost pressures for
airlines. The high cost of fuel, on the other hand, has forced the industry to
operate on a healthier basis by driving financially weakest competitors out of
the market. The weakening of the euro against the US dollar increased the costs
in euros of typically dollar-denominated fuel, leasing and traffic charges. At
the same time, growth in demand on the global aviation market has slowed down.
Despite the weak economic conditions, passenger traffic in Europe continued to
grow in the third quarter. Combined with the conservative stance airlines have
taken toward increasing their capacity, this led to improved load factors.
Traffic between Asia and Europe also grew due to strong demand. Nevertheless,
uncertain economic prospects in Europe, weaker consumer demand and slowing
growth in Asia cause increased uncertainty over the expectations of fourth
quarter traffic volume.
The uncertainty in the global economy was reflected in demand for cargo
traffic. Demand for cargo traffic is expected to remain flat year-on-year in
the fourth quarter, which is traditionally the strongest quarter in cargo
traffic. Unit revenues continue to be under pressure from a decline in the
demand for imports in the Eurozone and overcapacity in cargo traffic.
Progress in the structural change and cost reduction program
Finnair continued the implementation of its structural change and cost
reduction program, which began in August 2011. The aim of the program is to
achieve a permanent reduction in costs of 140 million euros by 2014. During the
period under review, the company concluded two significant change projects in
the areas of technical maintenance and catering.
In July, Finnair signed a ten-year contract for the sourcing of engine and
component services from the Swiss company SR Technics. As a result of the
contract, Finnair gradually discontinued its own engine operations and made
significant adjustments to its component services in the third quarter. Finnair
will keep certain parts of these operations as part of its line maintenance
organisation that looks after the day-to-day airworthiness of aircraft in order
to ensure smooth operations.
Under a five-year partnership agreement concluded between Finnair and LSG Sky
Chefs Group (LSG) on 1 August 2012, LSG assumed full managerial and operational
responsibility for the catering service provider Finnair Catering Oy at the
beginning of August. According to the partnership agreement, LSG has the right
to acquire Finnair Catering Oy's share capital for a pre-determined price
during the contract period.
The structural change and cost reduction measures implemented by the end of
September have helped Finnair achieve the cost savings target it previously set
for the full year 2012. Some of the savings will be realised from the final
quarter of the year. The cost reduction measures are already partly reflected
in lower unit costs, excluding fuel. Finnair's new estimate of the cumulative
permanent cost savings achieved by year's end 2012 is 90 million euros.
At the moment Finnair estimates that the biggest savings in the cost reduction
program will be achieved in personnel and maintenance costs, which both account
for approximately a quarter of the overall target of 140 million euros. The
share of fleet costs is approximately 10 per cent, and the shares of sales and
distribution costs, catering and ground handling are less than 10 per cent
each. Other costs, including IT, account for approximately 15 per cent of the
total reduction target.
So far significant savings have been achieved especially in fleet, sales and
distribution and catering costs, and there three areas represent more than 40
million euros of the total savings achieved thus far. Of the total saving
achieved, 16 million euros have been materialised through improved procurement.
Despite the good advancement of the structural change and cost reduction
program as a whole, the company has not progressed as planned in all its
savings categories. Finnair still has a long way to go to reach its long-term
target operating profit margin of six per cent. In the face of high fuel
prices, intensifying competition and significant fleet investments in the
coming years, the company must achieve a marked improvement in profitability.
With this in mind, Finnair has today published a new cost savings program with
the aim of achieving a permanent reduction in costs of a further 60 million
euros by the end of 2014.
Financial performance
Financial performance in July-September 2012
As a result of growing demand for passenger traffic and increased capacity ,
Finnair's turnover in July-September grew by 7.1 per cent year-on-year,
totalling 650.3 million euros (607.2).
During the period under review, the progress of the structural change and cost
reduction program was reflected in operational costs. Operational costs
excluding fuel decreased by 3.6 per cent, while capacity increased by 3.4 per
cent. Fuel costs, including hedging and costs caused by emissions trading, rose
by 24.5 per cent year-on-year to reach 179.6 million euros (144.3). Personnel
costs decreased as a result of reductions in personnel under the structural
change program, declining by 11.5 per cent to 97.7 million euros (110.4). Due
to a rise in fuel costs, euro-denominated operational costs rose 3.3 per cent
year-on-year to reach 603.5 million euros (584.2). The Group's operational
result, which refers to the operating result excluding non-recurring items,
capital gains and the change in the fair value of derivatives and in the value
of foreign currency-denominated fleet maintenance reserves, improved
substantially to reach 48.9 million euros (27.6).
Finnair's income statement includes the change in the fair value of
derivatives and in the value of foreign currency denominated fleet maintenance
reserves that took place during the period under review but will fall due
later. This is an unrealised valuation result based on the IFRS, where the
result has no cash flow effect and is not included in the operational result.
The change in the fair value of derivatives and in the value of foreign
currency denominated fleet maintenance reserves improved the operating result
by 7.7 million euros (-15.3). The operating result was positively impacted by
capital gains of 21.3 million euros (-1.7). Of this, 15.7 million euros related
to the restructuring of catering operations: Pursuant to IFRS, Finnair recorded
as income the amount to be paid to the company by LSG Sky Chefs during the
2012-2017 contract period as compensation for the transfer of control of
Finnair Catering Oy. The operating result was weakened by a non-recurring
expense of 6.8 million euros (0.0) related mainly to structural changes in the
area of technical services. The operating result reached a record level of 71.1
million euros (10.6). The result before taxes for the July-September period was
67.3 million euros (3.1) and the result after taxes was 50.8 million euros
(1.9).
Unit revenue per available seat kilometre (RASK) rose by 7.8 per cent from the
comparison period to reach 6.93 euro cents (6.43). Unit costs per available
seat kilometre (CASK) increased by 6.1 per cent to 6.60 euro cents (6.22),
mainly as a result of increased fuel costs. Unit costs excluding fuel (CASK
excl. fuel) declined by 1.1 per cent to 4.43 euro cents (4.48).
Outlook for 2012
Guidance on 26 October 2012:
Finnair estimates that the operational result for the second half of the year,
which is stronger than the first half of the year due to seasonal variations,
will reflect improved profitability compared to the first half of the year,
leading to a profitable operational result for the full year 2012.
The outlook for the world economy is still uncertain, and Finnair will adjust
its passenger traffic capacity with its current structure according to demand.
Finnair estimates that this capacity will increase on last year but less than 5
per cent. The growth will mainly come from Asian traffic, where Finnair
increased capacity in May by opening a new flight route to Chongqing, China.
Finnair's fuel costs are still estimated to be significantly higher in 2012
compared to the previous year due to increased capacity and high fuel prices.
Cost reductions of approximately 90 million euros out of the structural change
and cost reduction program's total target of 140 million euros are expected to
be achieved by the end of 2012. Finnair estimates that unit cost (CASK)
excluding fuel will decrease year-on-year in the second half of the year.
Previous guidance given on 10 August 2012:
Finnair estimates that the operational result for the second half of the year,
which is stronger than the first half of the year due to seasonal variations,
will reflect improved profitability compared to the first half of the year.
The outlook for the world economy is still uncertain, and Finnair will adjust
its passenger traffic capacity with its current structure according to demand,
if necessary. Finnair estimates that this capacity will increase on last year
but less than the 5 per cent level given in the earlier estimate. The growth
will mainly come from Asian traffic, where Finnair increased capacity in May by
opening a new flight route to Chongqing, China.
Finnair's fuel costs are estimated to be significantly higher in 2012 compared
to the previous year due to increased capacity and high fuel prices.
Cost reductions of approximately 80 million euros out of the structural change
and cost reduction program's total target of 140 million euros are expected to
be achieved by the end of 2012. The realisation of the cost reductions will
mainly take place during the second half of the year. Finnair estimates that
unit cost (CASK) excluding fuel will decrease year-on-year in the second half
of the year.
Disclosure procedure
Finnair Plc. follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its interim report January 1 - September 30, 2012 enclosed to this stock
exchange release. The Interim report January 1 - September 30, 2012 is attached
to this release in pdf format and is also available on the company's website at
www.finnairgroup.com.
Finnair will publish its 2012 financial statements bulletin on February 8,
2013.
FINNAIR PLC
Board of Directors
Result briefings
Finnair will hold a press conference on October 26, 2012 at 11:00 a.m. and an
analyst briefing at 12:30 p.m. at Helsinki-Vantaa Airport's World Trade Center,
located at the address Lentäjäntie 3. An English-language telephone conference
will begin at 3:00 p.m. Finnish time. You can attend the conference by dialling
your local access number 0800 770 306 and using the Participant PIN code
255856#
FINNAIR PLC
Communications
October 26, 2012
For further information, please contact:
Chief Financial Officer
Erno Hilden
Tel. +358 9 818 8550
erno.hilden@finnair.com
Financial Communications and Investor Relations Director
Mari Reponen
Tel. +358 9 818 4054
mari.reponen@finnair.com
IRO Kati Kaksonen
Financial Communications and Investor Relations
Tel. +358 9 818 2780,
kati.kaksonen@finnair.com, investor.relations@finnair.com
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