Finnair Group Interim Report 1 January – 30 September 2022

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Finnair Plc             Interim Report            28 October 2022 at 9.00 a.m. EEST

Q3 net result still negative. Comparable EBIT positive, driven by seasonality and pent-up demand. Strategy implementation initiated.

July – September 2022                                 

  • Earnings per share were -0.03 euros (-0.08)*.
  • Revenue increased by 260.6% to 719.2 million euros (199.4).
  • Comparable operating result was 35.2 million euros (-109.1). Operating result was 19.2 million euros (-106.0).
  • Exceptionally high fuel price had an adverse cost impact of c. 125 million euros** year-on-year.
  • Cash funds were 1,608.9 million euros (31 Dec 2021: 1 265.7) and the equity ratio was 8.3 per cent (31 Dec 2021: 11.8).
  • Net cash flow from operating activities was 11.8 million euros (27.1), and net cash flow from investing activities was -0.4 million euros (357.4).***
  • Number of passengers increased by 255.9% to 2.8 million (0.8).
  • Available seat kilometres (ASK) increased by 153.7% to 8,356.5 million kilometres (3,293.5).
  • Passenger load factor (PLF) was 80.1% (41.6).

January – September 2022

  • Earnings per share were -0.39 euros (-0.28).
  • Revenue increased by 292.9% to 1,669.3 million euros (424.9).
  • Comparable operating result was -181.8 million euros (-403.6). Operating result was -238.6 million euros (-394.2).
  • High fuel price had an adverse cost impact of c. 303 million euros** year-on-year.
  • Net cash flow from operating activities was 229.1 million euros (-149.8), and net cash flow from investing activities was -21.2 million euros (376.4).***
  • Number of passengers increased by 399.9% to 6.6 million (1.3).
  • Available seat kilometres (ASK) increased by 290.9% to 23,112.9 million kilometres (5,913.3).
  • Passenger load factor (PLF) was 65.9% (35.7).

* Unless otherwise stated, comparisons and figures in parentheses refer to the comparison period, i.e., the same period last year.

** Fuel price impact including impact of currencies and hedging

*** In Q3, net cash flow from investing activities includes 29.1 million euros of redemptions (26.3 million euros of investments) in money market funds or other financial assets (maturity over three months). In Q1–Q3, the redemptions totalled in net terms to 26.1 million euros (11.7 million euros of redemptions). They are part of the Group’s liquidity management.

Outlook

GUIDANCE issued ON 19 July 2022:

Demand has almost normalised particularly in Europe and in the United States. Finnair estimates that in Q3 2022, it will operate an average capacity of c. 70 per cent, as measured in ASKs, compared to the corresponding period in 2019 and in Q4 2022, it will operate similar or slightly higher volumes than in Q3. With the leases of aircraft with crew to other airlines, the total capacity deployed would be more than 80 per cent in Q3 and c. 80 – 85 per cent in Q4, depending on future lease agreements.

Significant uncertainty in Finnair’s operating environment prevails, however, as the market price of fuel is historically high and the length of Russian airspace closure, the impact of inflation on demand and costs, as well as the development of the COVID-19 pandemic and related measures are unclear.

Even though the impacts of the pandemic on Finnair’s operations have partially eased, the 2022 comparable operating result will be significantly negative for a third consecutive year due to the impacts of the Ukrainian war. Further, Finnair estimates that the difficult operating environment, inclusive of the closed Russian airspace, will prevail for a longer period and, therefore, the company is preparing a new strategy to improve its weak profitability and to strengthen its financial position. The company’s target is to complete the strategy work during the autumn of 2022.

Finnair will update its outlook and guidance in connection with the Q3 2022 interim report.

NEW GUIDANCE ON 28 october 2022:

Finnair estimates that in Q4 2022, it will operate an average capacity of c. 70 per cent, as measured in ASKs, compared to the corresponding period in 2019. With the leases of aircraft with crew to other airlines, the total capacity deployed would be c. 80 per cent, depending on future lease agreements.

In the short term, the strong demand for travel is predicted to continue, which will support Finnair's unit revenues as in the summer months of 2022. Significant uncertainty in Finnair’s operating environment prevails, however, because the market price of fuel is exceptionally high and the length of the Russian airspace closure, the impact of inflation on demand and costs, as well as the development of the COVID-19 pandemic and related measures are unclear. The company reiterates its guidance according to which the 2022 comparable operating result will be significantly negative for a third consecutive year.

Finnair will update the progress in the implementation of its new strategy as well as provide guidance and outlook for 2023 in connection with the financial statements bulletin for 2022.

CE­O Topi Manner:

In the third quarter, Finnair’s net result was negative, but our comparable operating result turned positive for the first time since the last quarter of 2019. A positive operating result in the seasonally strongest third quarter is a step to the right direction, but we have a long journey ahead of us to nurse the company back to health. Due to the combination of the heavy pandemic and the closure of Russian airspace, we are facing a uniquely difficult challenge. Thus, determined measures to implement our new strategy and to restore profitability at an annual level are vital.

During the summer, Finnair carried 2.8 million passengers, as the demand, which had been pent up during the pandemic, continued to materialise. Finnair’s revenue rose to 719.2 million euros (199.4), supported by the good development in unit revenues. Our comparable operating result was 35.2 million euros (-109.1) as our actions to reduce costs, improve sales and optimise revenues started to become visible. Nonetheless, the result for the period was still negative, -37.2 million euros, due to high financial expenses resulting from heavy indebtedness and exchange losses caused by the strong dollar.

The challenges in our operating environment continued, and our Q3 operating profit was still burdened by the exceptionally high fuel price, the strong US dollar, the remaining effects of the pandemic in e.g., travel restrictions in China, and the extended flight times and increased operating costs of our Asian routes due to the closure of Russian airspace.

The summer season was operatively challenging in the whole European aviation scene due to scarce resources. Our punctuality was among the best for European airlines, the performance of our Helsinki hub was a clear strength, and our customer satisfaction remained at a good level, with a Net Promoter Score of 40. Customers voted us the best airline in Northern Europe in the Skytrax survey, for the 12th consecutive time. All Finnair people working daily to ensure the best possible customer experience and operative quality are to thank for these achievements.

The closed Russian airspace will significantly affect Finnair's ability to make a profit in the long term, and in September, we announced our new strategy to restore profitability. Key actions to achieve this goal are a geographically more balanced network, fleet optimisation, strengthening of unit revenues, utilisation of partnerships, reduction of unit costs, building a sustainable balance sheet, and sustainability. The implementation of the strategy progresses throughout the organisation. Examples of a more geographically balanced network are the Mumbai route opened in August and our cooperation with Qatar Airways to commence flights from three Nordic capitals to Doha by the end of the year. As a part of our efforts to lower unit costs, negotiations with the personnel about changes to employment terms are progressing and we have reached conditional negotiation results with two of our unions. We are also seeking savings from other cost items. Further, we started discussions with our personnel after the period to streamline the company's structures globally. Strategy implementation will proceed at pace in every area and needs contribution from all stakeholders.

Financial reporting in 2023

The publication dates of Finnair’s financial reports in 2023 are the following:

  • Financial Statements Bulletin for 2022 on Wednesday 15 February 2023
  • Interim Report for January – March 2023 on Thursday 27 April 2023
  • Half-year Report for January – June 2023 on Friday 21 July 2023
  • Interim Report for January – September 2023 on Tuesday 31 October 2023

This text is a summary of Finnair's Interim Report January – September 2022. The full report is available as an attachment to this report.

FINNAIR PLC
Board of Directors

Briefings

Finnair will hold a results press conference (in Finnish) on 28 October 2022 at 11:00 a.m. at its office at Tietotie 9. It is also possible to participate in the press conference via a live webcast at https://finnairgroup.videosync.fi/2022-10-28-press.

An English-language telephone conference and webcast will begin at 1:00 p.m. Finnish time. To access the conference, kindly first register at https://call.vsy.io/access-8144. After the registration, you will be provided with phone numbers and a conference ID. To join the live webcast, please register at https://finnairgroup.videosync.fi/2022-q3.

For further information, please contact:

Chief Financial Officer Kristian Pullola, tel. +358 9 818 4960, kristian.pullola@finnair.com

Director, Investor Relations Erkka Salonen, tel. +358 9 818 5101, erkka.salonen@finnair.com

FINNAIR PLC

Further information:
Finnair communications, 358 9 818 4020, comms@finnair.com

Distribution:
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Finnair is a network airline, specialising in connecting passenger and cargo traffic between Asia, North America and Europe. Sustainability is at the heart of everything we do –  Finnair intends to reduce its net emissions by 50% by the end of 2025 from the 2019 baseline and achieve carbon neutrality latest by the end of 2045. Finnair is a member of the oneworld alliance. Finnair Plc’s shares are quoted on the Nasdaq Helsinki stock exchange