Finnair plans to take alternative measures to reach cost savings ‒ if other solutions not found,  estimated personnel impacts 680 employees

• Cuts planned in support functions
• Wider use of outsourcing an option if insufficient results in flight crew negotiations

Finnair Plc Stock Exchange Release 27 March 2014 at 13:00 EET

CEO Pekka Vauramo: We still hope to achieve results in negotiations, outsourcing and redundancies are always a secondary option

Finnair is starting today employee consultations with its personnel. The consultations concern employees working in administrative and support functions as well as cabin attendants. The measures are part of the savings program started in 2011, which aims at breaking Finnair’s loss-making cycle. The company still hopes that by achieving cost reductions in ongoing negotiations the redundancies could be avoided for the most part.

Support functions rationalised

Finnair plans to rationalise its administration and support functions, which could lead to a reduction of approximately 140 employees at this stage. Possible need for further reduction in these functions will be estimated during the rest of the year. The reductions would concern some operative, commercial and common corporate support functions that employ altogether some 800 persons in various tasks.

“We must carefully consider our focus in the support functions,” says Pekka Vauramo. “Can we be more efficient or are there tasks that can no longer be maintained? We believe that by focusing strictly on the essential and by improving our productivity we can achieve considerable savings.”

No progress in the flight crew negotiations, alternative measures planned

At the end of last year Finnair concluded new collective labour agreements in line with the Finnish Employment and Growth Pact. At the same time, the parties agreed on cost reduction negotiations that would be concluded with cabin attendants by the end of April 2014 and with pilots by mid-June. When Finnair announced its loss-making results for 2013, the company stated that it must assess other options for reaching its targets, in case the necessary agreements on cost reductions are not reached through negotiations.

Although the company’s priority and preference is to reach agreement with personnel at the negotiation table, it is now obliged to draft optional plans to increase outsourcing of flight crew. Finnair now begins employee consultations with personnel representatives on the topic.

“Loss-making Finnair, whose financial situation has further weakened during the past years, can no longer wait,” Vauramo emphasises. “The situation calls for quick action to restore our profitability. We have attempted to negotiate on cost reductions in personnel-related costs ever since we initiated the cost reduction program in 2011. We still hope to reach in the ongoing negotiations the kind of result that would allow us to continue flying with our current crew. The outsourcing of our flight crew is clearly a secondary option for us. We would like to continue to employ our current employees and create new jobs at Finnair."

“However, this is not possible with the current terms, since the present-day wage level is not equivalent to the market level. We want all Finnair employees to know the options we have at hand. Already during the Finnish Employment and Growth Pact negotiations, we stated that without a thorough reassessment of our CLAs Finnair has no employment or growth prospects. Decisions on Finnair’s future direction are made during the coming weeks at the savings negotiation tables and in the employee consultations covering the alternative options,” Vauramo adds.

Wider use of outsourcing in the cabin service

Finnair is considering wider use of outsourcing in the cabin service of its long-haul and short-haul traffic. In the initial stage, the company plans to outsource the cabin personnel of three long-haul routes at maximum during this year. In the next stage, Finnair would outsource the cabin service of more than 10 routes.

Finnair has in total 1500 cabin attendants in Finland. Due to the planned outsourcing the reduction of approximately 540 cabin attendants would be required.

Separate from the employee consultation process, Finnair is examining the possibility to set up a subsidiary that would produce cabin services and sell them to Finnair Plc.

In addition to the flight crew, Finnair concluded agreements in line with the Finnish Employment and Growth Pact also with IAU and PRO and is in discussions about salary and structural solutions with their local employee groups. Slight progress has been made especially in local negotiations in Technical Operations.

The employee consultations now beginning do not apply to pilots, because the pilot's savings negotiations deadline is later than others in June. Negotiations with pilots include significant changes to CLAs and the decisions are made later in spring.

In October 2012 Finnair started a 60 million euro additional cost savings program mainly in personnel-related costs. Finnair aims to save 18 million euros in cabin crew costs, 17 million euros in pilot personnel costs, and 8 million euros in IAU personnel costs. The savings target for other employee groups is 12million euros. Finnair’s Board of Directors has also reduced the variable part of the top management’s total remuneration as well as other benefits. In August 2013 Finnair announced that it had reached the targets of the 140 million euro cost savings program.

FINNAIR PLC

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

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