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2009-03-26 15:40:03 CET 2009-03-26 15:40:52 CET REGULATED INFORMATION Finnair Oyj - Decisions of general meetingDECISIONS OF FINNAIR PLC'S ANNUAL GENERAL MEETING 2009FINNAIR 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 |
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