Finnair Group Interim Report 1 January – 31 March 2022
Finnair Plc Interim Report 27 April 2022 at 9.00 a.m. EEST
Recovery from the pandemic progresses at pace whilst we are adapting to the reality of the closed Russian airspace
January – March 2022
- Earnings per share were -0.15 euros (-0.11)*.
- Revenue increased by 252.1% to 399.8 million euros (113.6).
- Comparable operating result was -132.9 million euros (-143.2). Operating result was -164.9 million euros (-149.1).
- Cash funds were 1,136.5 million euros (31 Dec 2021: 1 265.7) and the equity ratio was 7.2 per cent (31 Dec 2021: 11.8).
- Net cash flow from operating activities was 35.4 million euros (-117.7), and net cash flow from investing activities was -23.7 million euros (5.2).**
- Number of passengers increased by 482.0% to 1.5 million (0.3).
- Available seat kilometres (ASK) increased by 475.5% to 6,915.2 million kilometres (1,201.5).
- Passenger load factor (PLF) was 47.3% (25.5).
* Unless otherwise stated, comparisons and figures in parentheses refer to the comparison period, i.e., the same period last year.
** In Q1, net cash flow from investing activities includes 7.7 million euros of investments (9.3 million euros of redemptions) in money market funds or other financial assets (maturity over three months. They are part of the Group’s liquidity management.
Outlook
guidance issued on 17 February 2022 (partially withdrawn on 28 February 2022):
Travelling in Europe and to the United States is open but Asia remains highly restricted for travel, exclusive of countries such as Thailand, Singapore and India. There is prolonged uncertainty of when China or Hong Kong would be opening for travel. Due to e.g., the Omicron variant, Finnair now estimates that other Asian markets would gradually open for travel towards the end of Q2 2022.
In comparison to Q4 2021, Omicron is having a notable but short-lived adverse effect on revenue and costs in Q1 2022. Further, the ongoing travel restrictions will continue to soften demand, particularly to and from Asia going forward. Due to these factors as well as increased fuel price and incremental costs caused by the need to ramp up capacity for summer 2022, Finnair’s comparable operating loss in Q1 2022 is expected to be of a similar magnitude as in Q1 2021. Finnair reiterates its previous estimate that the comparable operating losses will continue also during the entire first half of 2022.
The latter half of 2021 demonstrated that there is robust pent-up demand for travel. During the first half of 2022, the impact of travel restrictions on Finnair’s business is expected to fade. Therefore, the company still estimates that the operational environment in the second half of 2022 will be closer to the pre-pandemic era, exclusive of China and Hong Kong, and expects a return to its 2019 traffic levels, as measured in annual ASKs, in 2023.
Finnair will update its outlook and guidance in connection with the Q1 2022 interim report.
On 28 February 2022, Finnair published a stock exchange release in which it withdrew the above guidance, to the extent that it related to Q1 2022 and the operational environment in H2 2022, due to the Russian airspace closure.
NEW GUIDANCE ON 27 April 2022:
Finnair's operating environment is two-sided. In Europe, the United States and South Asia*, travel is normalising as the impacts of the pandemic have eased. In contrast, travel restrictions in North Asia**, combined with the closed Russian airspace, have a significant impact on Finnair’s operating environment.
Finnair estimates that during the summer season in Q2 and Q3 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 that have now been agreed for the summer season, the total capacity deployed would be almost 80 per cent.
Finnair estimates that the comparable operating result in Q2 2022 will improve from Q1 2022 and be of a similar magnitude as in Q4 2021 (-65 million euros) supported by the strong rebound of demand in Finnair network yet burdened by the significant increase in fuel price and the continuing low level of North Asian traffic.
The company estimates that in Q3 2022, demand will be closer to the pre-pandemic levels in Europe, North America and South Asia.
Finnair will update its outlook and guidance in connection with the Half-year report 2022.
* India, Singapore and Thailand
** Japan, South Korea and China
CEO Topi Manner:
Over the past two years, Finnair has encountered two major disruptions of historic proportions: a global pandemic, and the Russian invasion that resulted in the closure of the Russian airspace. Both impacted heavily during the first quarter of 2022, the pandemic in the form of Omicron variant. Restrictions and lockdowns related to the Omicron weakened demand especially in January and February. As a result, the anticipated ramp-up of demand stalled for two months and our revenue thus decreased quarter-on-quarter, amounting to 400 million euros in Q1. Our comparable operating result remained strongly negative at -133 million euros mainly driven by the high fuel price and the Omicron impact on costs and demand.
At the beginning of the year, the Omicron wave hampered our operations in many ways, as both customers and Finnair made changes to flights, which congested our customer service. Our on-time performance also suffered from significant sick leaves in various parts of our operations. However, our systematic efforts to improve flight punctuality and to reduce queuing times at customer call centers improved customer satisfaction towards the end of the quarter. We will continue to increase customer service resources towards the summer to normalise queuing times. I warmly thank all our customers for their support, patience and valuable feedback.
At the end of February, our operating environment changed dramatically following Russia's invasion of Ukraine. The sanctions and countersanctions arising from the war closed the Russian airspace. On 28 February, we communicated in a stock exchange release that the potential Russian airspace closure would notably impact air traffic between Europe and Asia, which plays an important role in Finnair’s network, and that the negative financial impacts on Finnair will be significant especially if the situation prolongs. We also stated that we are considering different solutions in case the situation prolongs and have an active dialogue with the State of Finland.
We are now preparing for a prolonged Russian airspace closure and have already started to adapt our operations with many determined measures. As the first response, our updated network places more emphasis on connections to the west and South Asia. We opened a new route to Dallas at the end of March and will start new routes to Seattle and Mumbai during the summer. We launched a new cost reduction programme, the first part of which targets 60 million euros of permanent savings from distribution, aircraft leases and the continuous improvement of operations. These savings will be on top of the already achieved 200 million euros of permanent annual savings during the pandemic. We will complement the cost savings programme as we progress with determining our long-term response to the Russian airspace closure. Our cash position is still strong and the 400-million-euro hybrid loan granted by the State of Finland, which is fully undrawn, supports our balance sheet. The conversion of the hybrid loan to a capital loan is an additional step resulting from the ongoing dialogue with the State.
In addition, we have quickly found profitable use for our idle aircraft capacity by leasing aircraft with crew to other airlines. This generates income for us and provides work for a significant number of pilots, cabin crew, and technical staff. Thanks to these arrangements, we are able to avoid laying off Finland-based employees during the summer. We continue to review our fleet plan, evaluating both additional wet lease opportunities as well as the potential sale of idle aircraft.
Recovery from the pandemic is currently progressing at pace. Our customers’ booking behavior is normalising, and flights are being booked well into the summer and autumn. Demand is particularly coming back on routes in Europe, South Asia and North America, and the number of our daily flights will increase to more than 300 during the summer season. Aircraft refurbished with our new long-haul cabins are already in service, and the new premium economy class will be available from May on our Dallas, New York and Singapore flights.
The war in Ukraine affects us all. We are supporting Ukrainians who are fleeing the war with a 95% discount on key routes.
During the review period, we committed to setting Science Based Targets to reduce our carbon footprint. We also agreed on major purchases of sustainable aviation fuels with our oneworld partners and re-introduced the opportunity to offset flight emissions to our customers.
We are now preparing for a busy summer season and at the same time we are adapting to the reality of the closed Russian airspace. I warmly thank the entire Finnair team for their amazing resilience and dedication to serving customers amid these new changes.
Financial reporting in 2022
The publication dates of Finnair’s financial reports in 2022 are the following:
- Half-year Report for January–June 2022 on Tuesday 19 July 2022
- Interim Report for January–September 2022 on Friday 28 October 2022
This text is a summary of Finnair's Interim Report January – March 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 27 April 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/2022-0427-press.
An English-language telephone conference and webcast will begin at 1:00 p.m. Finnish time. The conference may be attended by dialling your local access number +358 (0)9 8171 0310 (Finland), 08 5664 2651 (Sweden), 033 3300 0804 (UK) or +44 (0)33 3300 0804 (all other countries). The confirmation code is 10451095#. To join the live webcast, please register at https://finnairgroup.videosync.fi/2022-q1.
For further information, please contact:
Chief Financial Officer Mika Stirkkinen, tel. +358 9 818 4960, mika.stirkkinen@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:
NASDAQ OMX Helsinki
Principal media
Finnair is a network airline, specialising in connecting passenger and cargo traffic between Asia 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.