Finnair Group interim report 1 January – 30 September 2015

Finnair Plc Interim Report 30 October 2015 at 9:00 am

The best quarter in Finnair’s history: operational result 64.2 million euros

July–September 2015

• Revenue grew by 2.3% year-on-year to 637.1 million euros (622.7).
• Operational result improved to 64.2 million euros (26.7).
• Operational EBITDAR was 115.1 million euros (80.1).
• Net cash flow from operating activities stood at 62.6 million euros (-8.9), and net cash flow from investing activities totalled -2.8 million euros (-15.1).
• Unit cost at constant currency excluding fuel (CASK excl. fuel) decreased by 0.8% year-on-year.
• Unit revenue at constant currency (RASK) decreased by 0.6% year-on-year.
• Ancillary revenue per passenger increased by 29% to 9.79 euros.
• Earnings per share amounted to 0.29 euros (0.11).

January–September 2015

• Revenue was on a par with January–September 2014, at 1,738.5 euros (1,731.8).
• Operational result improved to 22.9 million euros (-27.1).
• Operational EBITDAR was 171.7 million euros (133.1).
• Net cash flow from operating activities stood at 164.0 million euros (39.8), and net cash flow from investing activities totalled 86.4 million euros (126.3).
• Unit cost at constant currency excluding fuel (CASK excl. fuel) increased by 0.7% year-on-year.
• Unit revenue at constant currency (RASK) decreased by 0.6% year-on-year.
• Earnings per share amounted to 0.13 euros (-0.33).
• Ancillary revenue per passenger increased by 22% to 9.81 euros.
• Guidance unchanged: the operational result for the full year 2015 will be around break-even or slightly positive.

CEO Pekka Vauramo:

Finnair’s operational result in its seasonally strongest third quarter reached 64.2 million euros, which is the best quarterly result Finnair has ever posted. Revenue amounted to 637 million euros, which represents a year-on-year increase of a good two per cent.

The factors contributing to this encouraging result include an increased load factor and higher ticket revenue in our core business, passenger traffic, as well as brisk sales of ancillary services. In the Travel Services segment, Aurinkomatkat Suntours’ result improved substantially.

The profitability of passenger traffic improved year-on-year in all traffic areas except domestic flights, which are still loss-making on several routes. This is something we cannot be satisfied with, and we must adjust our capacity to better correspond with demand.

The cargo market continues to suffer from overcapacity. With the help of the new cargo terminal that is currently under construction, we aim to improve the efficiency of our cargo operations by increasingly specialising in demanding temperature-controlled cargo services for perishables and pharmaceuticals. These are areas in which we have a competitive advantage, and they also offer better margins.

The improvement in our result was attributable not only to increased revenue, but also lower costs. We achieved cost savings in areas such as staff costs, and we continued to benefit from the decrease in fuel prices that, due to our hedging policy, is reflected in our costs gradually and with a delay. In fact we expect our fuel costs to decrease in the coming quarters in spite of traffic growth as our old hedges expire. Our result was also boosted by our Asian sales currencies appreciating against the euro.

In early October, we became the first European airline to take delivery of the state-of-the-art A350 XWB wide-body aircraft. It will significantly improve the cost-competitiveness and customer experience of our long-haul traffic. Our initial experiences of the new aircraft type have been in line with our expectations, and we are enthusiastically looking forward to the growth of our A350 fleet. According to the current schedule, we will have five A350s in operation by the beginning of the second quarter of 2016, and seven by the end of next year. The new aircraft will provide added capacity and will enable our growth strategy, particularly in the Chinese market where the demand for air travel has remained strong despite the slowing down of economic growth. Next year, we will introduce new routes to Guangzhou, China, and Fukuoka, Japan and increase frequencies in transatlantic traffic to Miami and Chicago.

The growth in long-haul capacity also means that we must increase our narrow-body capacity to satisfy the demand for transfer traffic. With this in mind, we will increase our capacity in European traffic next summer.

With a view to future growth, our financial position is now solid. Cash flow was strong in the third quarter, and our liquid funds exceed half a billion euros. In October, we successfully issued a EUR 200 million hybrid bond, the largest ever issued in Finland. The hybrid bond will help us maintain a high equity ratio in the long run and support the financing of our growth.

I want to take this opportunity to extend my warmest thanks to everyone at Finnair for the strong quarter. I have also been very pleased to see the sense of solidarity and commitment created by the delivery of the long-awaited new A350 aircraft. We are in a strong position to enter a new phase of growth.

Outlook

Previous outlook

Finnair estimates that, in 2015, its operational result is around break-even or slightly positive.

Finnair reiterates its previous estimate that its capacity measured in Available Seat Kilometres will grow by approximately 3 per cent and that its revenue will remain approximately at the 2014 level. As a change to its previous estimate, the company now estimates that its 2015 unit costs excluding fuel at constant currency will remain at the 2014 level.

Finnair also reiterates as a separate guidance that, when calculated using the exchange rates effective at the end of the review period, the non-recurring items associated with the long haul fleet renewal in 2015 will have a substantial positive impact on Finnair’s operating result due to the strengthened US dollar.

As separately announced on 24 September 2015, the non-recurring positive net impact of these arrangements on Finnair’s operating profit in H2/2015 is expected to amount to approximately EUR 70 million.

Outlook (unchanged)

Finnair reiterates its previous estimates that, in 2015, its operational result is around break-even or slightly positive.

Finnair reiterates its previous estimate that its capacity measured in Available Seat Kilometres will grow by approximately 3 per cent and that its revenue will remain approximately at the 2014 level. The company estimates that its 2015 unit costs excluding fuel at constant currency will remain at the 2014 level.

Finnair also reiterates as a separate guidance that, when calculated using the exchange rates effective at the end of the review period, the non-recurring items associated with the long haul fleet renewal in 2015 will have a substantial positive impact on Finnair’s operating result due to the strengthened US dollar. The non-recurring positive net impact of these arrangements on Finnair’s operating profit in H2/2015 is expected to amount to approximately EUR 70 million.

Financial reporting

Finnair’s financial statements bulletin for 2015 will be published on Wednesday 11 February 2016.

This is a summary of Finnair Group interim report 1 January – 30 September 2015. The Finnair Group interim report 1 January – 30 September 2015 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

Briefings

Finnair will hold a press conference on 30 October 2015 at 11:00 a.m. and an analyst briefing at 12:30 p.m. at its office at Tietotie 9. An English-language telephone conference and webcast will begin at 2:30 p.m. Finnish time. The conference may be attended by dialling your local access number +358 9 2319 3041 and using the PIN code 2419797#. To join the live webcast, please register at: https://engage.vevent.com/rt/finnair~20151030

For further information, please contact:

Chief Financial Officer Pekka Vähähyyppä, tel. +358 9 818 8550, pekka.vahahyyppa@finnair.com

Financial Communications Manager Ilkka Korhonen, tel. +358 9 818 4705, ilkka.korhonen@finnair.com

IRO Kati Kaksonen, tel. +358 9 818 2780, kati.kaksonen@finnair.com

FINNAIR PLC

Further information:
Finnair communications, 358 9 818 4020, comms(a)finnair.com

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Finnair is a network airline specialising in passenger and cargo traffic between Asia and Europe. Helsinki’s geographical location gives Finnair a competitive advantage, since the fastest connections between many European destinations and Asian megacities fly over Finland. Finnair’s vision is to offer its passengers a unique Nordic experience, and its mission is to offer the smoothest, fastest connections in the northern hemisphere via Helsinki and the best network to the world from its home markets. Finnair is the only Nordic carrier with a 4-star Skytrax ranking and a member of the oneworld alliance. In 2014, Finnair’s revenues amounted to EUR 2,400 million and it had a personnel of almost 4,500 at the year-end. Finnair Plc’s shares are quoted on Nasdaq Helsinki.