Finnair Oyj - Decisions of general meeting

DECISIONS OF FINNAIR PLC'S ANNUAL GENERAL MEETING 2009

FINNAIR PLC   STOCK EXCHANGE RELEASE   26.3.2009  16:40

DECISIONS OF FINNAIR PLC'S ANNUAL GENERAL MEETING 2009

- The income statement and balance sheet of Finnair Plc and Finnair Group was
adopted 
- It was decided that no dividend is paid
- The Board of Directors and the President & CEO were discharged from liability
- The number of members in the Board of Directors and the number of auditors as
well as their compensations were adopted 
- A Board of Directors and auditors were elected
- Shareholder's proposal on appointment of the Shareholders' Nomination
Committee was approved								 

CHAIRMAN OF THE BOARD OF DIRECTORS CHRISTOFFER TAXELL'S OPENING SPEECH:

Dear Shareholders,

As Chairman of the Board of Directors, it is my pleasure to open the 2009
Annual General Meeting of Finnair Plc. 

In the latter part of 2008, the economy weakened sharply - in Finland, in
Europe and around the world. No signs of improvement can yet be seen; on the
contrary, the negative trend is continuing. No-one, not here or elsewhere, has
ever experienced such a development. 

As has often been the case before, the signs of decline in economic growth were
evident in the aviation industry at an early stage. Despite a lowering of fuel
costs, the world's scheduled passenger traffic airlines generated losses
totaling more than eight billion dollars last year.  Following a good 2007,
last year was also difficult for Finnair. 

Since the beginning of the year, our company's operating environment has been
more difficult compared with last year. Even the more optimistic forecasters do
not expect an economic upturn this year, and many do not expect one even in
2010. 

In such as a situation it is essential to focus on what can be done even to
achieve tolerable profitability - both in the short and long term. Measures to
achieve this are now the priority in Finnair. They generally receive much
publicity in Finland and stimulate much discussion, also outside the company.
This is an indication of how important a company Finnair is for many Finns.
This is a positive sign. 

The interest shown in Finnair's activities, however, is also characterised by
the fact that our company is seen as an institution which has a national
service role. Our domestic market is certainly important to us, of that there
is no doubt. But it is worth remembering that Finnair is a listed company
operating in an increasingly competitive international market, and that a
growing proportion of its customers come from beyond the borders of Finland.
Irrespective of nationality or the company's homeland, our customers will
choose Finnair only if our offering, our quality and our price level are
competitive.  This is a big challenge for us. 

Over the long term, we can be competitive only if our profitability is on a
sustainable basis. This is a big challenge for a company whose field of
business is currently experiencing major challenges. The large operators will
grow larger, which will strengthen their relative profitability. A trend
towards various state subsidies is also perceptible, which will distort
competition and pose a threat to serious operators, including Finnair. 

I want to make clear that the company's ownership structure does not influence
the fundamental principles of Finnair's operations - namely competition and
surviving on market terms. Anything else would be in conflict with the
assignment we have received from our thousands of shareholders. If air
transport one day becomes dependent on state subsidies, and operations become
tainted with unhealthy competition, Finnair will belong to the losers, not the
winners. Finnair's future depends on our ability to serve our customers and to
show in every way that we can excel in a competitive environment. 

I would like to draw shareholders' and all Finnair employees' attention to the
big changes that have taken place in the competitive situation of our industry
in recent years. They are reflected in all airlines as sharply weaker
profitability, bankruptcies, large personnel reduction and altered terms of
employment. 

It is in such an environment that Finnair must prevail. That is why the
measures to support profitability initiated by the company's management are
essential. The President & CEO and his team enjoy the strong support of the
Board of Directors, which represents all shareholders. In global competition,
one cannot survive on national terms.  Everyone who holds on too tightly to
achieved benefits will notice even quite soon that there may be no benefits to
hold on to. 

A key factor for Asian traffic, which is important for our company, is an
efficient, modern fleet of aircraft that is as environmental friendly as
possible. A deep economic recession has struck right in the middle of our huge
investment programme.  As important as this is for the company's future, the
programme's implementation cannot take place irrespective of the results of our
operations. 

There is no doubt that the structural change that has begun in the airline
industry will continue, and probably accelerate. It is in our common interests
that Finnair is an active participant in this development, not a target. 

Dear Shareholders! I wish you all a warm welcome to Finnair's 2009 Annual
General Meeting. 

I propose that Legal Counsellor Pekka Merilampi be elected Chairman of the
Annual General Meeting. 


REVIEW BY PRESIDENT & CEO JUKKA HIENONEN:

Dear Shareholders,

A year ago we were delighted by Finnair's record result. At last year's Annual
General Meeting, the figures for the start of 2008 seemed even stronger than
those from the previous year, but even so a change in the air could be sensed:
demand had shown the first signs of weakening and the sharp rise in oil prices
was a cause for concern. I then characterised the outlook with the seafaring
term ‘hazy'. Today, the outlook is cloaked in thick fog; darkness has fallen on
the economy and we are sailing through uncharted, reef-infested waters. I will
firstly discuss the air transport situation from the perspective of the sector
as a whole. 

Oil prices, which have punished air transport in recent years, began to fall
steeply last July, but at the same time demand, which was declining week on
week, presented airlines with an even bigger problem, if that were possible:
the disappearance of customers from aircraft. The strong trend of global growth
in air traffic, which had continued for years, has now, at least temporarily,
come to a halt: since last summer, passenger numbers have declined worldwide.
This fall has accelerated throughout the autumn and the beginning of this year.
Such sharp falls have not been recorded in the sector before, not even in the
wake of the September 2001 terrorist attacks in New York. The hardest setbacks
have been experienced in the sensitive cargo traffic market as well as in the
higher price category ticket classes favoured by business passengers - both
have fallen in recent months by up to 30 per cent or more. Despite capacity
cuts, aircraft load factors have fallen in recent months by 3-4 percentage
units. Average ticket prices have also declined almost everywhere. Airlines
have adjusted to the situation with cuts; according to an estimate of the
International Air Transport Association (IATA), adjustments made to date will
reduce flight capacity by around 8 per cent. 

Global air transport is a turbulent sector; since the profitable year of 2007,
it has collapse suddenly in less than a year, nearly down to the level of
losses recorded in the catastrophic period of 2001-2002. For the current year,
IATA has also forecast a loss for the entire industry. If this comes to pass,
then global civil aviation will have made more than 35 billion dollars of
cumulative losses in the first decade of the millennium: a sum which - previous
to the world being rocked by bank crises - would have been impossible to
imagine. 

It is clear that in this operating environment many airlines will not be able
to continue operating. The sector has overcapacity, which in Europe alone may
be around 15 per cent. A significant proportion of airlines are, in practice,
terminal-stage patients; they should have to make big cuts in their production
or their financiers should compel them to restructure themselves by cutting
costs, selling property or repaying their debts. Too many airlines, however,
are regionally important and are flag-carriers for their countries in terms of
image. I fear that we are entering an era when, due to national or other
political reasons, business will begin to practiced on protectionist
principles. 

In this respect, European air transport is in a special danger zone: a number
of small national airlines are ripe for bankruptcy. Moreover, of Europe's 40 or
so budget airlines, those who make a profit can be counted on the fingers of
one hand - even in good economic conditions. So the question is: will
competition be allowed to do its work and prune the weak from the strong? If it
is not allowed to do so, then the downward spiral of subsidies and
capitalisation is bottomless, as we have observed in other sectors which have
resorted to subsidies. Then ultimately it is not the best that wins, but the
one that has the richest owner. In sport there is a name for this - doping. It
creates for competitors participating in the sport, namely for companies'
management and employees, a wrong and fraudulent sense of the future, which
prevents the companies being trimmed down into good competitive shape.  That's
not to say that Finnair, which has grown in the environment of a small domestic
market and an expensive cost level will ultimately survive this contest, but at
least we will have attempted to do so by honest means. 

As a result of restructuring cycles that have followed one after another since
the turn of the millennium, Finnair has become more efficient, such that the
number of flight kilometres per employee has doubled. A large part of this
improvement is explained, of course, by our focus on long-haul traffic but, in
any case, last year we delivered a 63 per cent higher performance with 2,000
fewer employees than we did at the beginning of the decade. A good example of
this is Finnair Technical Services, which now has around 1,600 employees,
whereas five years ago it had 2,400. We have required Finnair Technical
Services to earn even its Finnair customer relationships through price and
quality levels arising in open competition - and this is what has happened. Via
its focus on a narrower product range, last year Technical Services achieved a
higher work performance than five years ago - with 800 fewer employees. Without
the bankruptcy of one customer and the consequent credit losses, Technical
Services would have already been modestly profitable last year. I am, moreover,
particularly proud of Technical Services' employees for the fact that despite
their increase workload - or perhaps precisely because of this - they consider
that their job satisfaction has clearly improved from the figures of 1-3 years
ago. In my personal experience, a common characteristic of working communities
is that the highest performing companies and departments generally lead the
field in job satisfaction as well. 

As we travel headlong into a difficult market environment, it would be in the
company's interests if its cost and production structure were flexible. This
would also be of benefit when recovery from these poor economic conditions
begins. The rises and falls experienced by air transport happen suddenly and
they demand fast decision-making and reallocation of production factors. In
this respect, Finnair is still too inflexible in terms of its structure, and
far from our desired target state: our partners are monopolistic, we produce
too many services ourselves and our collective employment agreements arose in a
world long gone. We ought to be able to renew our terms of employment and call
into question operating models to which we have become accustomed. 

In order to succeed in an international market, we cannot operate on national
terms. Since it joined the EMU monetary union, Finland has lost the option of
regulating its currency - namely devaluation - so in a rapidly weakening market
there should be other tools by which the competitiveness of production could be
improved. There has been much discussion in Finland about the significance of
company-specific agreements, because all companies are not in the same
situation in terms of their competitiveness. In finding these means, Finnish
working life is just at the beginning of the road, and here we in Finnair are
still clearly below-average students. 

We are continually coming up against “achieved benefits”: there is no desire to
adjust direction to accommodate winds coming form the market, and some people
believe that difficulties are temporary and can be survived with structures
intact. Finnair's collective employment agreements contain a considerable
number of restrictions on the employer's managerial prerogative, whether they
relate to use of company-owned aircraft, leasing, selection of crew hotels,
nationality of employees, language skills, purchasing of services from external
companies or terms of employment applicable to associated companies. Under
pressure to change agreements inherited from a totally different era, we have
found ourselves in confrontations from which the company and customers, and
ultimately also our own personnel, all suffer.  Essential changes are perceived
as a threat to livelihoods, even though, in fact, only the companies that
adjust quickly to changes can redeem their positions in the face of intense
competition. 

Our sector's and unfortunately also our company's operating culture includes
the strike weapon, and this extreme constitutional right is being exercised as
a threat, at least to my mind, in a cavalier manner. In the early part of this
year, for example, we have lost millions of euros in passenger revenue due to
three strike threats, the latest of which was indisputably illegal both in
terms of its timing and content. Particularly in times like these, this is
difficult understand, and such action is not in the interests of a single
Finnair employee. Our customers are with good reason irritated by this and it
is worth remembering that they have other options when travelling than choosing
a Finnair flight. 

It is clear that big upheavals have not left Finnair unscathed in their
passing. Our turnover still grew in 2008 by nearly 4 per cent, but the result
was unimpressive. Operational profit remained only marginally in profit at 7
million euros and was therefore only one tenth of the previous year's record
level. In a challenging market we succeeded in keeping our aircraft load factor
high at more than 75 per cent, but the average price obtained per passenger
kilometre fell by over 5 per cent.  The result for the financial year was
heavily burdened by derivative contracts made to hedge fuel purchases, for
which around 57 million euros in losses were recognised for the financial year.
The nature of hedging activity is such that when fuel prices rose we benefited
from comprehensive derivative contracts, but at the time when oil prices were
falling rapidly the derivatives had to be recognised at fair value and they
caused a relatively large write-down for a company of Finnair's size. According
to Finnair's hedging policy, at least 60 per cent and at most 90 per cent of
consumption for the coming six months is hedged. At its furthest, the hedging
horizon extends to three years. We have compared the hedging policy of other,
corresponding network airlines with our own and we have found them to be fairly
similar in structure. In the world today, the only airlines who leave their
fuel purchases unhedged are, as a rule, those who, due to their deficient
financial solidity, are not suitable as contracting parties in the derivatives
market. At the time of a large one-off loss, it would be very tempting to call
into question the sense of our entire hedging operation, but we must remember
that for the previous four years we benefited from using derivatives and they
have created predictability for our largest cost item, namely in the management
of fuel prices. 

A year ago we were the subject of severe and well-founded criticism in the
media for the late arrival of our flights. I promised at the last Annual
General Meeting, that we would prepare a serious action programme on this
issue. And that is what happened. Since last April, Finnair's punctuality has
improved remarkably and the company has been regularly among the five most
punctual European airlines. There is, however, still room for further
improvement. For example, in January-February 2009 the proportion of flights
arriving on schedule rose by nearly 20 percentage points to 87.5 per cent. The
amount of baggage left behind has also fallen to below half the previous year's
figure, even though conditions for personnel working at peak traffic periods
amidst the ongoing construction work at Helsinki-Vantaa are not easy. An
improvement in these conditions is thankfully expected at the end of this year
when a new baggage sorting system is taken into use. At the same time,
conditions in the long-haul traffic terminal will also improve significantly
and Finnair lounge facilities representing the highest international standards
will be taken into use. 

The situation in air transport will surely remain challenging in the near
future. We can do nothing about external circumstances. It is important,
however, that we have a strategy according to which we can proceed. Asian
traffic is suffering from the same economic difficulties as aviation everywhere
else. We will continue our goal-directed progress on selected routes. Our
challenges relate to our small domestic market, our low recognition and yield
per passenger kilometre compared with our large international competitors as
well as weak cost-competitiveness. 

We have, however, a clear programme on how we will survive this economic
downturn: 
1. we will compete for customers for our flights at a price at which they will
agree to come 
2. when we obtain them, we will deliver good service, product and quality
3. we will shelve unprofitable routes; we will not fly at a loss
4. we will adapt ourselves to the price and demand that we obtain in the market
5. we will keep our finance in a balance that will enable us to purchase new
aircraft 

We have now cut our capacity by over 10 per cent from pre-existing plans.
Unfortunately, in these conditions, adjustment of fixed costs is not happening
as quickly as the reduction of customers and flights would require. We also
have to ensure that we have available sufficient expertise and resources for
when economic conditions recover from the downturn. That's why we have adjusted
our organisation mainly by cutting fixed-term contract staff and by laying off
the remaining personnel. In the early part of 2009 we are burdened by high fuel
hedging and we can therefore benefit by only around 30 per cent of the fall in
prices that has happened in the oil market. What comes to demand we live
according to economic conditions generally, and in forecasting trends our
crystal ball is no better than anyone else's. 

Owing to pressure on average prices and the downward worldwide trend in load
factors, the result for early part of the year will be clearly loss-making.
From the booking situation perspective, the horizon extends around 4 months
ahead. The steepest declines in the market may be levelling off, however, and
via capacity cuts the market will reach a balance, possibly during the summer
or the second held of the year.  The world of finance is being buffeted by
exceptionally stormy winds and obtaining finance for investments has become
impossible for a number of airlines.  Finnair's financial position, however, is
strong for an airline and we believe that we can manage our record 400 million
euros of investments this year. Any prolongation of the downturn into a deep
recession, however, would pull the carpet from under our growth strategy and
the investments directed at it. So the next 12 months are going to be extremely
significant. 

Dear Shareholders, I am sorry that I cannot promise a better outlook than this
right now for Finnair. You have shown your faith in Finnair and you have
entrusted your assets to our care in this difficult sector. You surely cannot
be happy at the proposed zero dividend. You could have earned for your
investment a better return than what we were able to deliver. I assure you,
however, that we have made every effort to adapt to an unprecedented economic
downturn: in order to revitalise our structures, to perform better on schedule,
safely and serving our customers. I would like to thank Finnair employees for
the tenacious work they have done and to remind everyone that an overwhelming
majority of them do not recognise themselves from the public image which has
been painted of them as a result of the strike-sensitive trigger finger that
acted with poor discretion this spring. As you may have observed in the media,
I have not as the company's President & CEO avoided taking a view on the
company's affairs, even when this is likely to arouse criticism and displeasure
amongst some of our own people. I am not, however, criticising my excellent
personnel, only the structures whose time has run its course. 

Finnair is an expert, customer-oriented company that arouses strong opinions.
The point of departure for all development, however, is the recognition of
facts, even when it hurts to say so. 


INCOME STATEMENT AND BALANCE SHEET

The Annual General Meeting adopted the income statement and balance sheet of
Finnair Plc and Finnair Group and discharged the Board of Directors and the
President & CEO from liability for the financial year 2008. 

DIVIDEND

The Annual General Meeting decided that no dividend is paid based on the
balance sheet for the financial year that ended 31 December 2008. 

BOARD OF DIRECTORS

Christoffer Taxell was elected as the Chairman of the Board of Directors.
Christoffer Taxell, Sigurður Helgason, Satu Huber, Kari Jordan, Ursula Ranin,
Veli Sundbäck and Pekka Timonen of the current members were re-elected and
Elina Björklund was elected as a new member. 

Compensations to the members of the Board of Directors were approved as follows:
- Chairman 61,200 euros per year
- Vice Chairman 32,400 euros per year
- The other members 30,000 euros per year
- Meeting compensation to a member residing in Finland 600 euros and to a
member residing abroad 1,200 euros

AUDITORS

Authorised Public Accountants PricewaterhouseCoopers Oy and Authorised Public
Accountant Mr. Jyri Heikkinen were elected as auditors and Authorised Public
Accountants Mr. Timo Takalo and Mr. Tuomas Honkamäki were elected as deputy
auditors. 

SHAREHOLDER'S PROPOSAL ON APPOINTMENT OF THE SHAREHOLDERS' NOMINATION COMMITTEE

According to the proposal of the Ownership Steering Department of Government
Office representing the Finnish State, the Annual General Meeting appointed a
Shareholders' Nomination Committee to prepare proposals on the composition and
remuneration of the Board of Directors to the next Annual General Meeting. The
Shareholders' Nomination Committee consists of a representative of each of the
three biggest shareholders. In addition, the Chairman of the Board and one
member of the Board, elected by the Board and independent from the major
shareholders of the Company, would serve as expert members. 

Finnair Plc
Communications
26.3.2009

Additional information:
Mr. Taneli Hassinen, VP Financial Communications and Investor Relations, tel.
+358 40 504 3321