2013-08-14 08:30:00 CEST
2013-08-14 08:30:02 CEST
REGULATED INFORMATION
Finnair Oyj - Interim report (Q1 and Q3)
Finnair Group interim report 1 January – 30 June 2013
Q2 turnover grew by 2.6% to 609.7 million euros and the operational result was
6.1 million euros.
Finnair Plc. Interim report 14 August 2013 at 09:30
The historical comparative financials presented in the interim report include
certain changes to previously reported information. These changes result from
retrospective application of an amendment to IFRS accounting standard IAS19
Employee Benefits. The changes are described in detail in notes 2 and 17 to the
interim report.
Key figures 4-6 4-6 Change 1-6 1-6 Change 2012
2013 2012 % 2013 2012 %
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Turnover and result
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Turnover, EUR million 609.7 594.4 2.6 1,202.9 1,186.2 1.4 2,449.4
Operational result, 6.1 16.2 -62.4 -11.6 -7.3 -58.5 43.2
EBIT, EUR million*
Operational result, % 1.0 2.7 -1.7%- -1.0 -0.6 -0.3%- 1.8
of turnover p p
Operating result, -11.8 -16.6 28.9 -25.6 -35.3 27.6 33.8
EBIT, EUR million
EBITDAR, EUR million 51.5 65.7 -21.7 79.6 92.1 -13.5 240.2
Result before taxes, 21.2 -24.0 188.4 2.5 -48.7 105.2 14.8
EUR million
Net result, EUR 17.0 -18.7 190.9 1.2 -37.9 103.3 10.5
million
Balance sheet and
cash flow
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Equity ratio, % 32.7 29.3 3.4%-p 35.4
Gearing, % 13.3 35.4 -22.1% 18.0
-p
Adjusted gearing, % 70.4 106.8 -36.4% 77.8
-p
Capital expenditure, 8.0 2.9 176.4 27.0 10.3 162.1 41.4
CAPEX, EUR million
Return on capital
employed, ROCE, 12
months
rolling, % 6.8 -3.8 10.7%- 2.8
p
Return on equity, 7.0 -9.2 16.2%- 1.4
ROE, 12 months p
rolling, %
Net cash flow from 95.2 100.2 -5.0 78.6 92.3 -14.9 154.7
operating activities
Share
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Share price at end of 2.70 1.75 54.3 2.70 1.75 54.3 2.38
quarter, EUR
Net result for the 0.13 -0.15 189.7 0.01 -0.30 102.7 0.08
period per share**
Earnings per share 0.11 -0.16 167.1 -0.04 -0.33 88.7 0.01
(EPS)
Traffic data,
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unit costs and
revenue
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Passengers, 1,000 2,397 2,256 6.3 4,557 4,332 5.2 8,774
Available seat 7,754 7,346 5.6 15,457 14,989 3.1 30,366
kilometres (ASK),
million
Revenue passenger 6,062 5,694 6.5 12,192 11,519 5.8 23,563
kilometres (RPK),
million
Passenger load factor 78.2 77.5 0.7%-p 78.9 76.9 2.0%-p 77.6
(PLF), %
Unit revenue per
available seat
kilometre,
(RASK), cents/ASK 6.39 6.60 -3.1 6.23 6.32 -1.4 6.49
Unit revenue per
revenue passenger
kilometre,
yield, cents/RPK 7.18 7.52 -4.5 6.93 7.22 -4.0 7.30
Unit cost per
available seat
kilometre,
(CASK), cents/ASK 6.62 6.66 -0.7 6.59 6.59 0.1 6.58
CASK excluding fuel, 4.52 4.64 -2.4 4.49 4.55 -1.5 4.50
cents/ASK
Available tonne 1,166 1,130 3.2 2,314 2,325 -0.4 4,647
kilometres (ATK),
million
Revenue tonne 767 740 3.7 1,513 1,494 1.3 3,029
kilometres (RTK),
million
Cargo and mail, 37,010 36,854 0.4 69,059 74,746 -7.6 148,132
tonnes
Cargo traffic unit
revenue per
revenue tonne 24.00 25.48 -5.8 24.66 25.48 -3.2 25.45
kilometre, cents/RTK
Overall load factor, 65.8 65.5 0.3%-p 65.4 64.3 1.1%-p 65.2
%
Flights, number*** 25,239 23,852 5.8 48,757 47,827 1.9 95,097
Personnel
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Average number of 5,981 7,157 -16.4 6,784
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.
** Before hybrid bond interest.
*** The number of flights also includes Finnair's purchased traffic. Numbers
for the comparison periods have been changed accordingly.
CEO Pekka Vauramo:
“Finnair's turnover in the second quarter increased by 2.6 per cent. We can
be fairly pleased with that, taking into account the depreciation of the
Japanese yen and the effect this had on the company's euro-denominated revenue.
The increased demand in Asian and European traffic contributed to the growth in
turnover. Our improved load factors partly compensated for the decrease in unit
revenue (yield), but despite this our operational result totalled only 6.1
million euros (16.2).
I am particularly pleased that we achieved the savings target of 140 million
euros of the structural change and cost-reduction program already now.
Achieving these savings six months ahead of schedule is the result of an
uncompromising and determined effort by everyone at Finnair. For this, I would
like to extend my warmest thanks to the entire Finnair team.
Nevertheless, the operational result for the period under review is
disappointing. It underlines the necessity of the measures we have taken to
improve our business operations and customer service over the past few years
and the need to continue those measures. At the same time, we will need to
utilise the opportunities offered to us by the growing market.
Last October we set a target of achieving additional cost reductions of 60
million euros. We must now continue to implement a more agile structure and
renew the wage structures and earnings models. Part of the supplementary
cost-reduction target can be achieved by streamlining operations, but
accomplishing the target in full will require an improvement in labour
productivity. We must now find, in a dialogue with personnel, solutions and the
will to make changes.
Our future success is, however, built, through increasing revenue and
developing our products and services - not but cutting costs only. Satisfied
paying customers are the best way to ensure a successful future. The new Asian
routes launched during the review period, our increased market share in Asian
and European traffic, investments in product development and upcoming fleet
renewal are all steps towards profitable growth.
During just over two months as CEO, I have met a large number of Finnair
personnel. They all have a strong commitment to their work and the company. I
believe we all have a shared will to build the Finnair of the future.”
Business environment in the second quarter
Finnair's business environment remained difficult in the second quarter of
the year. European network carriers, Finnair included, continued to implement
structural change and cost-reduction programs to improve their competitiveness
in the prevailing tight competitive situation.
Despite the European economy being in a recession, demand for passenger
traffic in Europe continued to grow. Combined with the conservative stance
airlines have taken toward increasing their capacity, this led to improved load
factors. Measured in passenger volume, the market for flights between Helsinki
and Finnair's European destinations grew by 4.6 per cent, while the market
between Finnair's Asian and European destinations contracted by 2.1 per cent.*
Finnair was successful in increasing its market share in both markets.* The
demand for air cargo in traffic between Asia and Europe was largely unchanged
from the corresponding period last year.
The price of the largest individual cost factor of airlines, i.e. jet fuel,
remained at a high level. The euro appreciated nearly 26 per cent against the
Japanese yen and approximately two per cent against the US dollar compared to
the corresponding period in 2012. The yen is an important income currency in
Finnair's operations, while the dollar is a significant expense currency.
Progress of the structural change and cost-reduction programs
By the end of June 2013, Finnair had achieved the cost-reduction target of 140
million euros set for structural change and cost-reduction program commenced in
August 2011. The target was reached six months ahead of the original schedule.
The outsourcing decisions and other cost-reduction measures implemented as part
of the structural change and cost-reduction program have allowed Finnair to
move a significant share of fixed costs to volume-based variable costs. This
was reflected during the period under review as a decrease in airline unit
costs excluding fuel. Some of the cost reductions will not be realised until
the second half of the year.
In spite of reaching its cost reduction target, Finnair continues to pursue
further savings in all of the first cost reduction program's cost categories.
This is essential for improving the company's competitiveness, as high fuel
prices, cost reduction measures taken by competitors, intensified competition
and fleet investments in the coming years require a substantial improvement in
profitability. The long-term return objective set for the company by Finnair's
Board of Directors is an operational profit margin of six per cent.
The emphasis in pursuing further cost savings is on personnel and maintenance
costs, in which progress has lagged behind the original targets. The aim of the
supplementary cost-reduction program commenced in October 2012 is to reduce the
cost level permanently by an additional 60 million euros by the end of 2014. As
part of the supplementary program, Finnair is aiming to achieve substantial
savings in personnel costs. The objective is to achieve the level of market
wages and labour costs in the industry, primarily by implementing changes to
wage structures and working hours.
Finnair has today published a separate bulletin on the detailed targets of
the supplementary cost-reduction program.
Financial performance in April-June 2013
Finnair's turnover in April-June grew by 2.6 per cent year-on-year, reaching
609.7 million euros (594.4), while capacity increased by 5.6 per cent
year-on-year. The substantial depreciation of yen from the comparison period
had a negative effect on Finnair's euro-denominated revenue, which slowed down
the growth in turnover. Operational costs excluding fuel costs increased by 2.3
per cent to 436.5 million euros (426.7). Fuel costs, including hedging and
costs incurred from emissions trading, were 171.5 million euros (157.9).
Personnel costs declined by 10.6 per cent to 100.6 million euros (112.5) due to
the personnel reductions implemented after the comparison period, but part of
the personnel costs in the comparison period are now seen in the form of higher
costs for outsourced catering and maintenance services. Euro-denominated
operational costs rose by four per cent year-on-year and amounted to 608.0
million euros (584.6). 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, was weaker than in the comparison period at 6.1 million
euros (16.2).
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 IFRS, 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 amounted to 1.4 million euros
(-20.9). The non-recurring costs associated with the outcome of the employee
consultations regarding Technical Services that were concluded during the
period under review were recorded in their entirety in the second quarter and
constituted the majority of the period's total non-recurring items of -19.3
million euros (-11.9). The operating loss for the period decreased to -11.8
million euros (-16.6). In April, Finnair sold its entire holding of shares in
Norwegian Air Shuttle ASA and recorded a capital gain of 34 million euros as
financial income. The company's result before taxes for April-June increased to
21.2 million euros (-24.0) and the result after taxes was 17.0 million euros
(-18.7).
Unit revenue per available seat kilometre (RASK) declined mainly due to the
depreciation of the Japanese yen by 3.1 per cent year-on-year and amounted to
6.39 euro cents (6.60). Excluding the effect of exchange rate fluctuations,
RASK declined by 1.7 per cent year-on-year. Unit cost per available seat
kilometre (CASK) decreased by 0.7 per cent and amounted to 6.62 euro cents
(6.66). Unit cost excluding fuel (CASK excl. fuel) decreased by 2.4 per cent
and totalled 4.52 euro cents (4.64) as a result of successful cost-reduction
measures.
Outlook for 2013 - change in turnover guidance
Previous guidance
The uncertain economic outlook in Europe, weakened consumer demand and slower
growth in Asia increase the uncertainty of the future development of air
traffic. Fuel costs are expected to remain high in 2013 as well, and the demand
for air traffic is estimated to grow moderately.
Finnair estimates that its turnover will grow in 2013. Unit costs excluding
fuel (CASK excl. fuel) are expected to decrease compared to 2012. Finnair
estimates that its operational result will show a profit in 2013.
New guidance
The uncertain economic outlook in Europe, weakened consumer demand and slower
growth in Asia increase the uncertainty of the future development of air
traffic. Fuel costs are expected to remain high in 2013 as well, and the demand
for air traffic is estimated to grow moderately.
Finnair estimates its 2013 turnover to be approximately at the 2012 level due
to the pressure that the weak yen puts on the Japan generated unit revenues.
Unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared
to 2012. Finnair estimates that its operational result will show a profit in
2013
Disclosure procedure
Finnair Plc. follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its Finnair Group Interim report 1 January - 30 June 2013 enclosed to this
stock exchange release. The Finnair Group Interim report 1 January - 30 June
2013 is attached to this release in pdf format and is also available on the
company's website at www.finnairgroup.com.
Finnair's interim report for 1 January - 30 September 2013 will be published on
Friday 25 October 2013.
FINNAIR PLC
Board of Directors
Briefings
Finnair will hold a press conference on 14 August 2013 at 11:00 a.m. and an
analyst briefing at 12:30 p.m. at its new office at Tietotie 9. An
English-language telephone conference will begin at 1:45 p.m. Finnish time. The
conference may be attended by dialling your local access number +358 800 770
306 and using the PIN code 255856#
Finnair Plc.
Communications
14 August 2013
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
Kati Kaksonen, IRO
Financial Communications and Investor Relations
Tel. +358 9 818 2780
kati.kaksonen@finnair.com
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