2012-02-09 08:30:00 CET
2012-02-09 08:30:15 CET
REGULATED INFORMATION
Finnair Oyj - Financial Statement Release
Finnair Group Financial Statements 1 January–31 December 2011
FINNAIR PLC FINANCIAL STATEMENT RELEASE FEBRUARY, 9 2012 at 09:30 EET
In the fourth quarter Finnair's turnover increased by 11.7% and the operational
result was -31.6 million euros.
Key figures
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10-12/ 10-12/ Change 1-12/ 1-12/ Change
2011 2010 % 2011 2010 %
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Turnover and result
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Turnover EUR 577.4 516.9 11.7 2 257.7 2 023.3 11.6
mill.
Operational result, EUR -31.6 -6.7 - -60.9 -4.7 -
EBIT* mill.
Operational result % per -5.5 -1.3 -2.7 -0.2
of turnover cent
Operating result, EUR -30.1 -4.7 - -87.8 -13.3 -
EBIT mill.
EBITDAR EUR 26.4 38.0 -30.5 139.6 176.6 -21.0
mill.
Result before taxes EUR -38.2 -9.6 - -111.5 -33.0 -
mill.
Net result EUR -32.6 -5.7 - -87.5 -22.8 -
mill.
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Balance sheet and
cash flow
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Equity ratio per 32.6 36.2 -3.6%-
cent p
Net gearing per 43.3 27.8 15.5%-
cent p
Adjusted gearing per 108.4 79.6 28.8%-
cent p
Gross investment EUR 21.1 27.1 -22.1 203.9 183.5 11.1
mill.
Return on capital per - -5.2 -0.4 -4.8%-
employed (ROCE) cent p
12 months rolling
Return on equity per - -10.9 -2.7 -8.2%-
(ROE) cent p
12 months rolling
Net cash flow from EUR 8.5 16.4 -48.2 50.8 76.0 -33.2
operating activities mill.
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Share
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Share price at end of EUR 2.30 5.04 -54.4 2.30 5.04 -54.4
quarter
Earnings per share EUR -0.27 -0.06 - -0.75 -0.24 -
(EPS)
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Traffic data, unit
costs and revenue
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Passengers thousan 1 913 1 660 15.2 8 013 7 139 12.2
d
people
Available seat mill. 7 288 6 045 20.6 29 345 25 127 16.8
kilometres (ASK)
Revenue passenger mill. 5 192 4 441 16.9 21 498 19 222 11.8
kilometres (RPK)
Passenger load factor per 71.2 73.5 -2.3 73.3 76.5 -3.2
(PLF) cent %-p %-p
Unit revenue per cents/A 6.1 6.4 -4.5 6.0 6.2 -3.1
available seat SK
kilometre (RASK)
Unit revenue per cents/R 7.44 7.35 1.2 7.24 7.11 1.8
revenue passenger PK
kilometre, yield
Unit cost per cents/A 6.7 6.9 -2.3 6.4 6.6 -2.7
available seat SK
kilometre (CASK)
CASK excluding fuel cents/A 4.9 5.3 -7.0 4.7 5.0 -6.1
SK
Available tonne mill. 1 151 959 20.0 4 571 3 808 20.0
kilometres (ATK)
Revenue tonne mill. 698 606 15.2 2 823 2 471 14.2
kilometres (RTK)
Cargo and mail tonnes 38 031 33 729 12.8 145 883 123 154 18.5
Cargo traffic unit cents/R 26 26 -0.8 27 26 3.1
revenue per revenue TK
tonne kilometre
Overall load factor per 60.7 63.2 -2.5 61.8 64.9 -3.1
cent %-p %-p
Number of flights Pcs. 18 585 17 861 4.1 78 916 74 195 6.4
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Personnel
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Average number of 7 467 7 578 -1.5
employees
* Operational result: Operating result excluding changes in the fair value of
derivatives and in the value of foreign currency denominated fleet maintenance
reserves, non-recurring items and capital gains.
CEO Mika Vehviläinen on the results:
Finnair continued to grow in 2011. Our turnover increased in line with our
expectations by 11.6 % year-on-year, and we also progressed in our cost savings
program as anticipated. Unfortunately the increased fuel price and global
uncertainties more than offset our progress in cost savings, and Finnair's
operational result was a loss of 60.9. Naturally, we cannot be satisfied with
this result.
The year 2011 began with strong growth in aviation industry, which was slowed
down already in March after the tsunami in Japan in March. The growth was also
negatively impacted by the weakening of the global economy in the second half
of the year. The capacity growth slowed down clearly towards the end of the
year, and unlike in previous recessions in the Western countries, the oil price
remained high due to the strong growth of developing countries and the
uncertainty of the situation in the Middle East.
The seasonally strong third quarter was followed by considerably weaker fourth
quarter and growing year-on-year loss. The achieved savings of the set 140
million euro reduction target were in line with the target but still moderate
during 2011, and we estimate that a majority of the savings will be realised by
the end of 2012
At mid-year it became obvious that the company has to carry out a significant
structural change in order to end its loss-making cycle and build a Finnair for
the future. In August 2011, we published an extensive restructuring and
cost-reduction programme with an aim to restore the company's vitality and
enable its future growth. The changes are necessary and inevitable.
Our strategy is to focus on increasing our Asian traffic and pursue leadership
in the Nordic countries in cooperation with a strong partner network. This
works as a compass for us all amid the changes. The significance of the
partner network will be emphasized even more because, as a small company, we
can no longer do everything by ourselves. Competition in our industry has
tightened so that the continuous development of both cost competitiveness and
quality require specialisation and large-scale cooperation.
We began to implement the changes in maintenance operations already at the
beginning of 2011, and the transformation will continue this year. We also
reorganised cargo traffic operations and began to look for a partner for our
catering business. In addition, we took a step forward in strengthening our
position in the Nordic countries by establishing Flybe Nordic, together with
British airline Flybe. The new carrier specialises in regional flying in the
Nordic and Baltic countries.
In the second half of the year, we optimised our operations in many ways:
Together with the aircrew, we agreed upon solutions to improve productivity,
optimised our route network and the use of our fleet as well as renegotiated
aircraft leasing agreements. As a result of the optimised use of the fleet, we
can give up several short-haul planes. In addition to this, we have identified
several other targets for cost reduction and optimisation. The optimisation
efforts have also paid off; our unit costs excluding fuel decreased by 6.1 per
cent during 2011.
In addition to cutting costs, we have focused on our future growth and
improved the quality or our operations further. In May last year, we opened
the Singapore route, and began preparations for the Chongqing route to be
opened in May 2012. These steps have been taken in order to double our turnover
in Asian operations by 2020.
Our aim is to strengthen our position in the Nordic markets as well. The plans
that were announced today are aimed to end the loss-making cycle of European
traffic and establish a cost-effective partnership company for this traffic.
We are investigating the possibility of transferring the entire narrow-body
fleet or a part of it to the new company. This would be a big change for
Finnair. We will now begin discussions with our potential partners and staff
about alternative implementation methods for this change.
During 2011, we received recognition for the excellent quality of our service.
Among other honours, Finnair was named the best airline in Northern Europe.
During the year, we also focused on developing a smoother travel experience. As
a result, customer satisfaction, punctuality and the speed of baggage handling
continued to improve, and we were among the best network carriers in these
areas. This was a great achievement from our personnel, which has continued to
show their full commitment in customer service even amid the transformation.
Employees deserve a warm thank you for their excellent work.
The on-going structural change is demanding for the staff. Our aim is to
discuss the process openly with different parties, and to facilitate difficult
changes by using measures that are possible in Finnair's current situation.
However, I believe that our strategy, clear goals and strong company culture
will help us surpass the difficult and painful change. Together, we are now
building the Finnair of the future.
Markets and general overview
Global airline traffic has changed significantly in recent years, and similar
structural change is happening in the industry as has already been faced by
many other industries. Typical for this change process are market
liberalisation, increasing competition, overcapacity, consolidation, alliances
and specialisation. The global consolidation of the industry is predicted to
continue. Finnair aims to make use of the opportunities created by this
development.
The year 2011 was marked by high oil prices and increased capacity in the
market. In the early 2011, the industry was getting ready for expected growth
in the markets, due to which supply increased more rapidly than demand. The
competitive situation thus became very tough. As the global economy weakened,
the competitive situation continued to get even tighter, which affected both
passenger and cargo traffic.
The impact of the cabin crew strike in December 2010 on demand was still felt
at the beginning of the year. The seasonally weak start of the year was also
affected by the shocking catastrophe in Japan in March, and as a result
particularly the demand from Europe to Japan decreased significantly. Despite
this, Finnair continued its daily flights to Japan. The demand from Japan to
Europe recovered rapidly but travel from Europe to Japan during the rest of the
year was weaker than in the previous year.
The strong capacity growth in air traffic stabilised in the second quarter due
to high oil prices, the uncertainty in the global economy, the disaster in
Japan as well as the disturbances in the Middle East and Northern Africa.
However, Finnair was able to increase its market share in the traffic between
Asia and Europe on the routes it operates. Business travel and the demand for
business class also developed positively during the first half of the year.
The growth in demand slowed down in the second half of the year due to the
uncertainty in the global economy. Increasing macro-economic instability led to
a weaker than expected development of business travel and weakened the
profitability of cargo traffic. Due to overcapacity in the package tours
markets, the operational result of our package tours subsidiary Aurinkomatkat
exceptionally showed a loss. The high price of oil and the disturbances at the
start of the year also weakened the profitability of the company for the whole
year, due to which Finnair's operational result for 2011 showed a 60.9 million
euro loss.
Finnair transformation and cost reduction programme
In 2011, it became obvious that Finnair would have to carry out a substantial
structural change in order to meet the needs of the changing aviation
landscape. The company has to break its loss-making cycle so that it can build
the Finnair of the future according to its strategy. After careful strategic
work and extensive industry comparison, Finnair announced in August that it
aims to reduce its annual costs permanently by 140 million euros by 2014. The
transformation and cost reduction programme focuses particularly on improving
the profitability of short-haul flights in the tightened competitive
environment. In order to improve cost competitiveness, the company focuses on
its core activities and building an even stronger partnership network around
itself.
According to the company's estimates, the biggest cost reductions will be
achieved in personnel and maintenance costs, as the share of both of these is
approximately a quarter of the overall target. The share of sales and
distribution costs is approximately 15 per cent and the share of IT, fleet and
ground handling costs amounts to approximately 30 per cent of the overall
reduction target.
Finnair reduced its overhead costs by streamlining administration and
optimising procurement, marketing and distribution activities. The company aims
to further reduce procurement costs through centralised management.
In the aviation services, the company's baggage handling and apron services
were transferred to Swissport. The company also explores options to find a
cost-efficient solution for equipment and engine maintenance and investigates
possible partnering opportunities and structural solutions for Catering.
In November, Finnair introduced new pricing categories for domestic and
Scandinavian flights. The purpose of the new price categories is to attract new
customer segments and make flying a more attractive alternative in regional
traffic. For enabling the new pricing scheme, the company began to optimize the
size and utilisation of its fleet. The capacity of the A32S fleet is also being
increased through new cabin configurations. Moreover, Finnair announced that it
is looking for alternative production platforms in order to reduce the unit
costs of European and domestic traffic and to increase flexibility. New
solutions that improve productivity were also agreed upon with the aircrew.
During 2011, the company developed Uraportti, a concept to help Finnair
personnel find employment as quickly as possible when it is necessary to reduce
staff. Significant changes in the company's operations, deeper alliances and an
increase in cost-effectiveness in all operations are required in order to
achieve the planned cost reductions. These measures mean big changes to the
company's personnel, and staff cuts cannot be avoided.
In 2011, approximately 10 million euros of the set 140 million euro reduction
target in annual costs by 2014 were achieved. The cost reductions that require
structural changes are estimated to be implemented mainly in 2012, while the
overall target is estimated to be reached by the end of 2013.
Both Finnair's Board of Directors and the company's management are committed
to Finnair's structural change and to the company's development so that Finnair
can face the industry's competitive challenges.
Outlook for 2012
The continuing uncertainty in the world economy, the seasonal fluctuation in
demand as well as continued high price of fuel are reflected in the operational
result of first half of the year, which is estimated to be clearly loss-making.
Finnair's passenger traffic capacity in its current structure and form is
estimated to grow by around 5 per cent in 2012. The growth will come mainly
from Asian traffic, where Finnair will increase capacity by opening a new route
to Chongqing in May.
Finnair's fuel costs are estimated to be significantly higher in 2012 compared
to the previous year due to increased capacity and high price of fuel.
Cost reductions of 80 million euros out of the total target of 140 million
euros are estimated 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.
Financial result 1 October-31 December 2011
In Q4 of 2011 Finnair's turnover increased by 11.7 per cent (12.9%) year on
year and totalled 577.4 million euros (516.9). The group's operational result,
which refers to the operating result 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, was -31.6 million euros
(-6.7). The operating result was -30.1 million euros (-4.7). The result before
taxes was -38.2 million euros (-9.6) and the net result -32.6 million euros
(-5.7)
Finnair's result 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 year but will fall due later. This is an unrealized valuation
result based on the IFRS financial reporting standard, where the result has no
cash flow effect and which 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 result reported for the
last quarter by 4.6 million euros. A year earlier, the profit and loss effect
of the corresponding item was 5.6 million euros.
The exchange rate fluctuation between the US dollar and the euro did not
affect the operational result significantly in the fourth quarter. At the end
of December, the degree of hedging for a dollar basket for the next 12 months
was 71 per cent.
Euro-denominated operating costs amounted to 613.4 (529.9) million euros in
the last quarter of 2011. Fuel costs, including price and currency hedging,
rose by 37.3 per cent, amounting to 146.4 million euros.
Personnel costs were 117.8 million euros (114.0). Other rental costs were 31.4
million euros (27.0). The item includes rental payments for capacity bought
from other airlines, which share has grown markedly due to the increased use of
leased capacity.
Financial result 1 January-31 December 2011
In 2011, the turnover of Finnair Group was 2,257.7 million euros (2 023.3
million euros in 2010). The 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, totalled -60.9 million euros (-4.7). The operating result
amounted to -87.8 million euros (-13.3). The result before taxes was -111.5
million euros (-33.0) and the net result was -87.5 million euros (-22.8).
Changes in the fair value of derivatives and in the value of foreign currency
denominated fleet maintenance reserves impaired the reported full year by -2,4
million euros (-6.4).
The euro-denominated operational costs for the full year were 2,335.6
(2,050.7) million euros. Fuel costs, including price and currency hedging, rose
by 28.6 per cent, amounting to 555.2 million euros (431.7). The
euro-denominated market price of fuel has risen by nearly 50 per cent from the
previous year. Personnel costs were 455.4 million euros (438.8). Other rental
costs were 128 million euros (88.0). The item includes rental payments for
capacity bought from other airlines, which share has grown markedly due to the
increased use of leased capacity.
The net cash flow from operating activities for the full year amounted to 50.8
million euros (76.0). The return on capital employed for 12 months was -5.2 per
cent (-0.4) and the return on equity was -10.9 per cent (-2.7).
Disclosure procedure
Finnair Plc. follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its Financial Statements for 2011 enclosed to this stock exchange release.
Finnair's Financial Statements for 2011 is attached to this release in pdf
format and is also available on the company's website at www.finnairgroup.com.
FINNAIR PLC
Board of Directors
Press Conference
Finnair will hold a press conference on 9 February 2012 at 11:00 a.m. and an
analyst briefing at 12:30 p.m. at Helsinki Airport's World Trade Center,
located at the address Lentäjäntie 3. A phone conference on the financial
statements will be held at 17 (Finnish time) in English. The telephone number
for the conference is +358 (0)923 101 514, and the PIN-code is 444649#.
Finnair Plc
Communications
9 February 2012
For further information, please contact:
Chief Financial Officer
Erno Hilden
telephone +358 9 818 8550
erno.hilden@finnair.com
Investor Relations and Financial Communications Director
Mari Reponen
telephone +358 9 818 4054
mari.reponen@finnair.com
Investor Relations Officer
Kati Kaksonen
Financial Communications and Investor Relations
telephone +358 9 818 2780
kati.kaksonen@finnair.com, investor.relations@finnair.com
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