Post on 28-Apr-2018
2 08/08/2008 Presentation name / Author
Airline industry at a historical turning point
Fuel price has a stranglehold on the businessAverage ticket prices have not kept up with costsMore efficiency required from airlinesWeak companies are dumping prices to ensure short-term cash flow, weakening the profitability of the industryMore bankruptcies and mergersRisk of new subsidy interferences
3 08/08/2008 Presentation name / Author
Cold winter ahead
Lufthansa – result drop 29%Ryanair – result drop 85%British Airways – result drop 90%Air France-KLM – result drop 53%Iberia – result drop 85%Cathay Pacific – result drop into the redFinnair – result drop 81%All airlines are cutting capacityPersonnel cuts all aroundCapacity decrease also from bankruptcies
4 08/08/2008 Presentation name / Author
Expensive fuel and low load factorsspoiled the quarter
Finnair’s operational result clearly weakened from lastyear’s second quarterPoor load factorsUnit revenues for flight operations down 2.2 per centper tonne kilometreFuel costs up by 37.6 per centUnit costs were clearly down despite expensive fuel50 million euro efficiency programmeDemand for cargo remains strongPunctuality improved significantly in April-June
5 08/08/2008 Presentation name / Author
Finnair’s second quarter clearly weaker than previous year
Q2/2008 Q2/2007 Change%
1.5
-27.0
-80.9
-
-
-44.2
-46.1
Turnover mill. € 546.1 538.1
One off items/ capital gains 2.9 5.0
Fair value changes of derivatives 12.6 4.9
Operating profit/loss (EBIT) 20.7 37.1
Profit for period 13.9 25.8
Adjusted EBITDAR* 54.0 74.0
Adjusted EBIT* 5.2 27.2
*excl. capital gains, fair values changes of derivatives and non recurring items
6 08/08/2008 Presentation name / Author
Strong cash balance, weakened cash flow
Cash flow statement (EUR mill.) Q2/2008 Q2/2007
Cash flow from operations 87 114
Liquid funds at the beginning 540 294
Change in liquid funds -103 -44
Investments and sale of assets -109 -204Investments -145 -245Change of advances and others 36 41
Cash flow from financing -81 46
Liquid funds at the end with financial interestbearing assets at fair value 437 250
Cash flow January-June
7 08/08/2008 Presentation name / Author
Strong balance sheet
0
20
40
60
80
100
120
2002 2003 2004 2005 2006 2007 Q2 2008
Equity ratio Adjusted Gearing%
8 08/08/2008 Presentation name / Author
Unit costs dropped
Q2/08 Q2/07
Unit costs of flight operations* c/ATK -4,6% -3,8 %Unit costs of flight operations excl. fuel* c/ATK
-12,9% -5,3 %
Personnel expenses c/ATK -8,7% -5,0 %Fuel costs c/ATK +22,5% +1,3 %Traffic charges c/ATK -5,5% -3,1 %Ground handling and catering €/passenger
+21,2% +3,3 %
Sales and marketing €/passenger +3,9% +7,3 %Aircraft lease payments and depreciation c/ATK
-13,6% -14,4 %
Other costs c/ATK -20,5% -2,9 %* excluding fair value changes of derivatives and non-recurring itemsATK = Available Tonne Kilometre
9 08/08/2008 Presentation name / Author
Unit costs decreased still more than yieldChange YoY
-20
-15
-10
-5
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
% Yield (EUR/RTK) Unit costs (EUR/ATK)
2004 2005 200620032002 2007 2008
10 08/08/2008 Presentation name / Author
Productivity improvedProductivity (incl. Aero) (ATK/person) 12 m rolling sum
240
290
340
390
440
490
540
590
01.0
2
04.0
2
07.0
2
10.0
2
01.0
3
04.0
3
07.0
3
10.0
3
01.0
4
04.0
4
07.0
4
10.0
4
01.0
5
04.0
5
07.0
5
10.0
5
01.0
6
04.0
6
07.0
6
10.0
6
01.0
7
04.0
7
07.0
7
10.0
7
01.0
8
ATK1000/person
11 08/08/2008 Presentation name / Author
Despite business growth, number of staff stable
0
2000
4000
6000
8000
10000
12000
14000
1999 2000 2001 2002 2003 2004 2005 2006 2007 Q2 2008
Personnel on averagePersonnel
12 08/08/2008 Presentation name / Author
Challenges have been metin difficult conditionsPeriod Issue Change Level of
challenge
H107 Telephone serviceCustomer feedback
Over 90% answered in under1 minute
1
H207 Baggage delays Number of delayscut to a third
2
Q208 Passenger loadfactors down
62% => 79% 3
H108 Flight delays From 18th position to 5th position
4
H208 Fuel price vs. ticketprices
5
13 08/08/2008 Presentation name / Author
Efficiency programme underway
Decision made on 50 million euro efficiencyprogrammeResult effect visible next yearPersonnel cuts at most 500 peopleMain efficiency improvement areas:• Capacity adjustment / discontinuing unprofitable
flights– Effect on staff and variable costs
• Partners’ pricing and deepening cooperation• Fuel burn / flight procedures• Support functions and business unit interfaces
14 08/08/2008 Presentation name / Author
Load factors back to normal levels
July traffic performanceScheduled traffic increased 6%Scheduled traffic passenger load factor 79%Leisure traffic passenger load factor 90%Asian demand grew by 12% in July, load factor 80%, cargo 20%
15 08/08/2008 Presentation name / Author
Growth in Asian traffic continues
Seoul launched as new destination in June
Asian demand grew 18.8% in January- July, cargo loads by 31.6%, despite travel restrictions in China
65 flights a week to Asia in the summer
Non-stop flights to 11 destinations, daily to sixIndia up to 13 flights per
weekGuangzhou on winter break
16 08/08/2008 Presentation name / Author
42%
41%
4%13%
Aasia-Eurooppa
Via Helsinki>50 %
More revenues from Asian trafficDistribution of passenger and cargo revenues in scheduled traffic
Asia USDomestic Europe
Asia-Europegateway
>50%
17 08/08/2008 Presentation name / Author
Long-haul network in summer 2008
7 New York
Tokyo 4Nagoya 4
Osaka 7Beijing 7
Shanghai 7
Hong Kong 7Guangzhou 4
Bangkok 7
Delhi 7Mumbai 6
Seoul 5
19 08/08/2008 Presentation name / Author
Fuel costs H1/2007 vs. H1/2008
Fuel hedging outside hedging calculations: H1/Y2007 -5 MEUR ja H1/Y2008 +13,5
33
111
207
278
-24-38-11
0
100
200
300
400
H1/2007 Volume Price Flynordic Currency Hedging H1/2008
MEUR
20 08/08/2008 Presentation name / Author
Fuel costs clearly over a quarter of turnover
2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: 20,2% of turnover2008: >27% of turnover
Finnair scheduled traffic has hedged 70% of its fuel purchases for the next six months, thereafter for the following 24 months at a decreasing level.
A change of 10 per cent in fuel price between August-December will affect Finnair’s 2008 result by over 10 million euros at the current hedging rate.
21 08/08/2008 Presentation name / Author
Fuel hedging rates (Scheduled Passenger Traffic, 30 June 2008)
70% 71%
0%
25%
50%
75%
100%
2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2
22 08/08/2008 Presentation name / Author
Outlook
Outlook weakened by volatility of oil price and shortbooking horizonDramatically increased fuel costs cannot be added on ticket prices for nowAnnounced industry capacity cuts approximately 7%, surplus capacity will also disappear with bankruptciesFinnair Scheduled Passenger Traffic capacity willincrease by approximately 5% in H2 (H1 > 10%)At current expectations latter part of year operatingresult may be loss-making
24 08/08/2008 Presentation name / Author
Quarterly change in profitability
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
MEUR
2003 2004 20052002 2006 2007
Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and non recurring items)
2008
25 08/08/2008 Presentation name / Author
Average yield and costs EUR c/RTK & EUR c/ATK
0
20
40
60
80
100
120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Yield (EUR/RTK) Unit costs (EUR/ATK)
2004 2005 200620032002 2007 2008
26 08/08/2008 Presentation name / Author
Segment results
2008 2007Q2 Q2
MEUR
Leisure Traffic -2.5 1.1
Total 5.2 27.2
Scheduled Passenger Traffic 1.9 27.7
Aviation Services 4.4 1.3Travel Services 1.4 1.2Unallocated items 0.0 -4.1
Excluding capital gains, fair value changes of Derivatives and non restructuring items
27 08/08/2008 Presentation name / Author
Segment results
2008 2007Q1-Q2 Q1-Q2
MEUR
Leisure Traffic 8.6 6.7
Total 16.3 33.0
Scheduled Passenger Traffic 1.5 27.4
Aviation Services 6.9 4.6Travel Services 1.8 2.5Unallocated items -2.5 -8.2
Excluding capital gains, fair value changes of Derivatives and non restructuring items
28 08/08/2008 Presentation name / Author
ROE and ROCERolling 12 months
-4
-2
0
2
4
6
8
10
12
14
16
Q1 20
02Q2
2002
Q3 20
02Q4
2002
Q1 20
03Q2
2003
Q3 20
03Q4
2003
Q1 20
04Q2
2004
Q3 20
04Q4
2004
Q1 20
05Q2
2005
Q3 20
05Q4
2005
Q1 20
06Q2
2006
Q3 20
06Q4
2006
Q1 20
07Q2
2007
Q3 20
07Q4
2007
Q1 20
08Q2
2008
% ROE ROCE
29 08/08/2008 Presentation name / Author
In 2007-14 a fleet of up to 15 Airbus A330/A340 aircraft• Boeing MD-11 fleet will be phased out by March 2010
In 2014-16 a fleet of up to 15 new technologyAirbus A350XWB aircraft
New aircraft enable future growth
30 08/08/2008 Presentation name / Author
Most modern European fleet
Average age of Finnair’s European fleet approximatelyfive years29 Airbus A320 family aircraftTen smaller Embraer 170- eight larger 190 modelaircraft already in the fleet, three arriving 2009-2011New aircraft have increased flexibility, improved loadfactors, reduced costs and are eco-efficient
31 08/08/2008 Presentation name / Author
Investments and cash flowfrom operations
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 Q1-Q2 2008
Operational net cash flow InvestmentsMEUR
32 08/08/2008 Presentation name / Author
Aircraft operating lease liabilities
0
100
200
300
400
500
600
2002 2003 2004 2005 2006 2007 Q2 2008
MEUR Flexibility, costs, risk management
On 30 June all leases were operating leases. If capitalised usingthe common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 June 2008 would have been38,8%
33 08/08/2008 Presentation name / Author
Finnair Financial Targets
”Sustainable value creation”
Operatingprofit (EBIT)
EBIT margin at least 6% => over 120 mill. € in the coming few years
EBITDAREBITDAR margin at least 17% => over 350 mill. € in the coming few years
Economicprofit
Pay out ratio Minimum one third of the EPS
AdjustedGearing
Gearing adjusted for aircraft lease liabilities not to exceed 140 %
To create positive value over pretax WACC of 9,5%
34 08/08/2008 Presentation name / Author
Finnair’s Financial Targets
Description of targets
Operatingprofit (EBIT)
EBITDAR
Economicprofit
Pay out ratio
AdjustedGearing
Turnover + other operating revenues – operating costs
Result before depreciation, aircraft lease paymentsand capital gains
Operating profit EBIT – Weighted Average Cost of Capital
Interest bearing debt + 7*Aircraft lease payments– liquid funds) / (Equity + minority interests)
Dividend per share / Earnings per share