Finnair Group interim report 1 January – 30 June 2014

Improved passenger load factor and progress in cost savings were not enough to compensate for the weak unit revenue development - Q2 operational result showed a loss of 19.6 million euros

Finnair Plc. Interim report 15 August 2014 at 09:30 EET

April–June 2014

• Turnover declined by 7.2% to 565.7 million euros (609.7).
• The operational result was -19.6 million euros (7.5).
• Net cash flow from operating activities stood at 69.2 million euros (101.2), and cash flow from investments totalled -92.2 million euros (-46.5). The cash flow from investments includes aircraft sale and leaseback arrangements implemented during the review period as well as advance payments for the first A350 aircraft.
• Unit cost per available seat kilometre excluding fuel, (CASK excl. fuel), decreased by 2.4 per cent from the previous year’s level.
• Unit revenue per available seat kilometre (RASK) fell by 5.8%.
• Finnair updates its guidance and estimates its turnover in 2014 to be significantly lower than in 2013 and its 2014 operational result to show a significant loss.

CEO Pekka Vauramo:

The second quarter of 2014 was difficult. Finnair’s turnover declined by 7.2 per cent year-on-year to 565.7 million euros. The factors affecting the decrease in turnover included a substantial decline in unit revenue, the loss of external turnover resulting from the restructuring of aviation services, and the weak development of tour operator Aurinkomatkat Suntours. The impact of the weak economic prospects in Finland on domestic demand and intensified international competition, particularly in long-haul traffic, had a negative effect on our unit revenue. The appreciation of the euro against our other primary revenue currencies continued to weaken our unit revenue from passenger traffic. The challenging operating environment has also been reflected in the revenue development of other airlines.

Our passenger load factors in April–June improved year-on-year, and at the same time we made progress with our cost reduction program. I am pleased that our cost reduction targets and market-based approach have been met with understanding also among our personnel, and that we were able to reach agreement on the necessary cost reductions with some of our personnel groups. However, these positive steps were not sufficient to compensate for the drop in revenue, and our operational result declined to a substantial loss at 19.6 million euros in a quarter traditionally strong for Finnair.

Achieving the cost reductions we are pursuing and reaching market level costs in all cost categories is absolutely essential in this financial situation. Finnair is very committed to achieving a competitive cost level and structure.

Outlook

Outlook on 15 August 2014:

The ongoing uncertain economic outlook in Europe and Asia is contributing to weak consumer demand in our main markets. Air traffic is expected to grow moderately in 2014. Finnair, however, will not be able to benefit from that growth without progress in its cost reduction program and its target cost structure in place.

Finnair estimates its turnover in 2014 to be significantly lower than in 2013. Fuel costs are expected to remain high. Due to delays in the personnel cost reduction negotiations and the unfavourable market conditions driving the decline in unit revenue, Finnair estimates that its 2014 operational result will show a significant loss.

Outlook issued on 2 June 2014:

The ongoing uncertain economic outlook in Europe and Asia is contributing to weak consumer demand in our main markets. Air traffic is expected to grow moderately in 2014. Finnair, however, will not be able to benefit from that growth without progress in its cost reduction program and its target cost structure in place.

Finnair estimates its turnover in 2014 to be substantially lower than in 2013. Fuel costs are expected to remain high. The outcome of Finnair's ongoing employee consultations and cost-saving negotiations will have a significant impact on financial performance in 2014, and therefore the company will reconsider giving guidance for its full-year 2014 financial performance after the savings negotiations have been concluded.

Financial reporting 2014

Finnair’s Interim report for 1 January – 31 September 2014 will be published on Friday 31 October 2014.

This is a summary of Finnair's January-June 2014 Interim report. The Finnair Group Interim report 1 January – 30 June 2014 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 15 August 2014 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 for analysts will begin at 3:00 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#

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, 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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