2012-08-10 08:30:00 CEST
2012-08-10 08:30:06 CEST
REGULATED INFORMATION
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Finnair Oyj - Interim report (Q1 and Q3)
Finnair Group Interim report January 1 – June 30, 2012
In April-June, turnover grew by 10.2 per cent year-on-year to 594.4 million
euros and the operational result was 14.7 million euros
Finnair Plc Interim report 10 August 2012 at 09:30
Key figures 4-6 4-6 Change 1-6 1-6 Change 2011
2012 2011 % 2012 2011 %
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Turnover and result
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Turnover, EUR million 594.4 539.4 10.2 1,186. 1,073. 10.5 2,257.
2 1 7
Operational result, 14.7 -13.8 >20 -10.3 -56.9 81.9 -60.9
EBIT, EUR million 0
Operational result, % of 2.5 -2.6 5.1%-p -0.9 -5.3 4.4%-p -2.7
turnover
Operating result, EBIT, -18.1 -25.2 28.2 -38.3 -68.3 43.9 -87.8
EUR million
EBITDAR, EUR million 64.2 33.8 89.9 89.1 37.4 138.2 139.6
Result before taxes, EUR -25.5 -30.2 15.6 -51.7 -76.4 32.3 -111.5
million
Net result, EUR million -19.8 -23.0 13.9 -40.2 -56.8 29.2 -87.5
Balance sheet and cash
flow
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Equity ratio, % 29.2 32.9 -3.7%- 32.6
p
Gearing, % 35.5 24.0 11.5%- 43.3
p
Adjusted gearing, % 107.5 78.7 28.8%- 108.4
p
Capital expenditure, 2.9 30.9 -90.6 10.3 61.8 -83.3 203.9
CAPEX, EUR million
Return on capital -3.1 -3.4 0.3%-p -5.2
employed, ROCE, 12
months rolling, %
Return on equity, ROE, -7.8 -7.9 0.1%-p -10.9
12 months rolling, %
Net cash flow from 100.2 94.5 6.0 92.3 60.6 52.3 50.8
operating activities
Share
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Share price at end of 1.75 3.57 -51.0 1.75 3.57 -51.0 2.30
quarter, EUR
Earnings per share -0.17 -0.20 15.0 -0.35 -0.48 27.1 -0.75
(EPS), EUR
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Traffic data,
unit costs and revenue
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Passengers, 1,000 2,256 2,040 10.6 4,332 3,925 10.4 8,013
Available seat 7,346 7,151 2.7 14,989 14,505 3.3 29,345
kilometres (ASK),
million
Revenue passenger 5,694 5,117 11.3 11,519 10,456 10.2 21,498
kilometres (RPK),
million
Passenger load factor 77.5 71.6 5.9%-p 76.9 72.1 4.8%-p 73.3
(PLF), %
Unit revenue per
available seat
kilometre,
(RASK), cents/ASK 6.60 6.02 9.7 6.32 5.78 9.2 6.03
Unit revenue per revenue
passenger kilometre,
yield, cents/RPK 7.52 7.36 2.2 7.22 7.06 2.2 7.24
Unit cost per available
seat kilometre,
(CASK), cents/ASK 6.66 6.38 4.5 6.59 6.38 3.2 6.43
CASK excluding fuel, 4.64 4.63 0.2 4.55 4.66 -2.3 4.67
cents/ASK
Available tonne 1,130 1,092 3.5 2,325 2,224 4.5 4,571
kilometres (ATK),
million
Revenue tonne kilometres 740 668 10.7 1,494 1,356 10.2 2,823
(RTK), million
Cargo and mail, tonnes 36,854 34,119 8.0 74,746 68,566 9.0 145,88
3
Cargo traffic unit
revenue per
revenue tonne kilometre, 25.48 27,43 -7.1 25.48 26.85 -5.1 27.00
cents/RTK
Overall load factor, % 65.5 61.2 4.3%-p 64.3 61.0 3.3%-p 61.8
Flights, number 17,820 20,362 -12.5 36,166 40,864 -11.5 78,916
Personnel
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Average number of 7,157 7,519 -4.8 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:"I am pleased to see that Finnair's turnover grew by more than 10 per cent in
the second quarter compared with the corresponding period in 2011. Our turnover
reached nearly 600 million euros, thanks to increased capacity, growing demand
in passenger traffic and the positive development of passenger load factors.
During the second quarter, our operational result turned positive by 14.7
million euros; a result with which we are satisfied in this difficult
competitive environment - particularly when taking into account the price of
fuel that has remained high in the second quarter. Despite the temporary
decrease in the world market price of oil, our fuel costs in the period under
review were 19.9 per cent higher than in the comparison period.
The result reflects not only increased demand but also the successful progress
of our structural change and cost reduction programme. We have taken definite
steps forward, although the majority of cost savings are still being realised.
We will continue to develop our competitiveness determinedly in line with the
goals we have set by surveying new cost reduction measures and by seeking
opportunities to further increase our turnover. Work to secure our future will
continue.
In order to succeed, it is absolutely necessary for us to improve the
efficiency of our operations substantially. This year, several European
airlines have gone bankrupt, which is a clear indication of the challenges our
industry is currently facing. However, we intend to overcome these challenges
and emerge as a winner. Finnair is proceeding with changes accordingly.
In June, we concluded employee consultations regarding the discontinuation of
Finnair's engine and component services and in July, after the period under
review, we signed a multi-year service procurement agreement with the Swiss
company SR Technics. The agreement will come into effect gradually in the third
quarter of the current year. The sale of our catering operations to the German
LSG Sky Chefs Group fell through in May, but we continued negotiations with LSG
and in early August we announced a partnership agreement with them,
transferring control in Finnair Catering Oy to LSG. With agreements signed with
SR Technics and LSG, we have made significant progress in structural change and
taken decisive steps toward becoming a company focused on aviation business.
Savings resulting from these arrangements can gradually be seen in our result
as of the third quarter of the current year.
During the spring and summer, we have sought means to improve the
profitability of our European traffic by exploring partnership solutions. In
May, we announced our plans to transfer the European flights flown on twelve
Embraer 190 aircraft to be operated by Flybe. This represents about one third
of our European traffic. Our intention is to execute this planned business
transfer in October, and it will generate definite savings for us in the coming
years. In connection with this business transfer, we signed an agreement with
Finnair pilots, which will also improve the efficiency of our operations.
In addition to the Flybe partnership, we have analysed cooperation
opportunities in order to solve the problems related to our European Airbus
traffic. This analysis will be continued and our goal is to find solutions that
would be in line with the overall interests of the company and would promote
our operations as a network company.
During the second period, we opened a new route to Chongqing. The first months
on this route have gone as planned. In addition, we have introduced new
ancillary services. Although these services are still a minor source of income,
their launch has nevertheless been promising.
I believe that our positive development will continue in the second half of
the year, provided that traffic develops according to our estimates and our
cost reduction program proceeds in line with its goals. Although there is a lot
of economic uncertainty around the globe, in Europe in particular, we expect
the operational result for the second half of the year, cyclically stronger
than the first half of the year, to reflect improved profitability compared to
the first half of the year.”
Business environment
The global airline industry is undergoing a similar structural change as that
already faced by many other sectors. 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. The intense competition is reflected in the major structural change
and cost reduction programmes implemented by several European airlines, as well
as bankruptcies. Finnair's goal is to take advantage of the opportunities
presented by the changes in its industry and strengthen its position in traffic
between Europe and Asia as well as within Europe.
In April-June, global air traffic grew compared with the corresponding period
in 2011. The development of demand exceeded expectations particularly in Europe
where conservative capacity increases and discontinued capacity on some routes,
caused by changes in the competitive environment, also contributed to the good
development of traffic. During the second quarter, Finnair also benefited from
decreased capacity on certain routes from Helsinki to Europe. Traffic between
Asia and Europe grew, thanks to economic growth in Asia. On the other hand,
several European airlines opened new routes from Central Europe to China, which
intensified competition.
In April-June, the price of the largest individual cost factor for airlines -
jet fuel - remained at historically high level. Uncertainty in the world
economy and in the eurozone was reflected in the entire industry, both as a
decline in business travel and as low volumes in cargo traffic. In traffic
within Europe, a decline in demand for business travel was partly compensated
by increased travel in other price categories. Demand for cargo traffic
weakened.
The Finnish package tour market suffered from overcapacity still in the second
quarter despite the fact that tour operators slightly decreased their summer
offering from the planned. In the comparison period, package tour operations
were negatively influenced by the effects of the Arab Spring on leisure travel.
Progress in the structural change and cost reduction programme
During the review period, Finnair continued the implementation of its
structural change and cost reduction programme, which began in August 2011. The
aim of the programme is to achieve a permanent reduction in costs of 140
million euros by 2014.
In April, Finnair signed a Memorandum of Understanding according to which
Finnair will source engine and component services from the Swiss company SR
Technics. The final 10-year cooperation agreement was signed in July. As a
result of outsourcing engine and component services, Finnair will discontinue
its own engine operations and make adjustments to the component services.
Finnair will keep certain parts of these operations as part of its line
maintenance organisation that looks after the daily airworthiness of aircraft,
in order to ensure smooth operations.
The sale of Finnair's catering operations to LSG Sky Chefs Group fell through
in May due to an investment freeze set by the Board of Directors of Lufthansa,
the parent company of LSG. A Memorandum of Understanding about the deal was
signed in March. After the transaction fell through, the parties continued
analysing partnership opportunities and in August Finnair and LSG signed a
partnership agreement.
In April-June, Finnair took several measures around the group to improve the
efficiency of its operations. For example, Finnair started using automated
check-in machines in the Economy class check-in at Helsinki-Vantaa Airport. The
company also continued to optimise its flight schedules and route network.
Upon realisation, the Flybe Memorandum of Understanding related to European
traffic that was announced during the period under review is also expected to
contribute to cost reductions.
Finnair estimates that the biggest savings in the cost reduction programme
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 sales and distribution costs is approximately 15 per cent and the combined
share of IT, fleet and ground handling costs is approximately 30 per cent of
the total reduction target. The programme progresses as planned and Finnair
expects to achieve savings of 80 million euros by the end of this year. The aim
is to achieve the remaining 60 million euros of the overall cost savings target
in 2013.
Financial performance
Financial performance in April-June 2012
As a result of increased capacity and growing demand in passenger traffic,
Finnair's turnover in April-June grew by 10.2 per cent year-on-year, totalling
594.4 million euros (539.4).
During the period under review, the progress of the structural change and cost
reduction programme could be seen as costs increased at a slower pace than
capacity. In the second quarter, operational costs excluding fuel increased by
0.6 per cent year-on-year while capacity increased by 2.7 per cent. Fuel costs,
including hedging and costs caused by emissions trading, rose by 19.9 per cent
year-on-year, amounting to 157.9 million euros (131.7). Personnel costs
amounted to 113.9 million euros (110.4). The total euro-denominated operational
costs grew by 5.2 per cent year-on-year and were 586.1 million euros (557.2).
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 despite a marked increase in fuel costs and amounted to 14.7
million euros (-13.8). The strengthening of the US dollar against the euro did
not affect the operational result significantly, thanks to the hedging of fuel
purchases.
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 weakened the operating result
reported for the second quarter by 20.9 million euros (-11.3). The operating
result was also impaired by non-recurring items related to the structural
change amounting to -11.9 million euros (0.0); consequently, the operating
result showed a loss of 18.1 million euros (-25.2). The result before taxes was
-25.5 million euros (-30.2) and the result after taxes -19.8 million euros
(-23.0).
In the second quarter, unit revenue per available seat kilometre (RASK) rose
by 9.7 per cent from the comparison period to 6.60 euro cents (6.02). Unit
costs per available seat kilometre (CASK) increased by 4.5 per cent to 6.66
euro cents (6.38) mainly as a result of the increased fuel costs. Unit costs
excluding fuel rose by 0.2 per cent to 4.64 euro cents (4.63) and this increase
in costs results from exceptionally low traffic charges in the comparison
period.
Outlook for 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 programme'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 - June 30, 2012 enclosed to this stock exchange
release. The Interim report January 1 - June 30, 2012 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
Q2 Result briefings
Finnair will hold a press conference on August 10, 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 3:30 p.m. Finnish time. The conference may be attended by
dialling your local access number +358 923 101 514 (Toll-free UK: 08002799491,
Sweden: 0200896900) and using the Participant PIN code: 255856#
FINNAIR PLC
Communications
August 10, 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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